In the late afternoon on Wednesday, February 19th (Eastern Time, USA), Facebook announced that it was acquiring WhatsApp for $19 billion in cash, stock, and restricted stock. While I’m not a financier, I think $19 billion was a bit much as I’ve read that it roughly translates to $42 or so per WhatsApp subscriber. I think it was a good move, nonetheless.
Facebook wants to remake itself into a fully mobile company. And they are well on their way. But, WhatsApp was what I (and several others in the industry) call: Mobile-First. Mobile-first means that the mobile experience is first and foremost as a service or even online marketplace is launched. This is why the Japanese firm Rakuten acquired Viber and I think this is among the many reasons that Facebook acquired WhatsApp. Interestingly (and perhaps timely), my previous blog post highlights “Mobile-First” and the social networking aspect of eCommerce (or an online marketplace). In the posting, I highlighted a women’s fashion app called Poshmark that lives the “mobile-first” concept as a core strategy. In the comments section of that blog, I included a quote from Rakuten’s CEO about why he acquired Viber. Note the recurring theme and then think about what the acquisition means to Facebook.
WhatsApp further provides a strong “mobile-first” DNA – one that they can add to their nest of acquisitions – Instagram, for example. Now, Facebook does note that they will operate these as independent companies, but what I believe is that Facebook is aiming to create a comprehensive mobile-first experience – from social networking, photo sharing and now messaging. I would not be a bit surprised to see – in the coming year or two – that WhatsApp becomes the default Facebook Messenger. Mark Zuckerberg did note that “WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.” I think with 450 million WhatsApp subscribers plus the 507 million mobile Daily Active Users, that they could achieve that goal. Obviously, there is quite a bit of overlap, so you just can’t add up the two numbers. Otherwise, it would just not be prudent to continue two or more Person to Person (P2P) messaging apps for the long term.
What does this mean to SMS and standards based messaging? It doesn’t mean too much, yet – everyone that is using SMS is not going to all of the sudden abandon SMS for WhatsApp, just because Facebook acquired them. But, I think it opens up a variety of possibilities for Facebook and non-SMS messaging in general in that mobile operators must consider. Operator partnerships as well as enterprise partnerships could emerge as a result of this “mobile-first” ecosystem. Look at how virtually every business developed Facebook markets have a Facebook business page now. Couple that with a dedicated messaging capability in the Facebook ecosystem, and you have new ways to engage consumers / customers. Social, messaging, images/video, a platform for business visibility, and even voice – looks kind of like a very flexible mobile-centric communications ecosystem to me.
Mobile operators need to take notice and they need to carefully consider their SMS offerings to their subscribers and what it means in terms of not just competing, but meeting their subscribers – their customers’ needs. Instead of “fighting OTTs,” I think they have a lot to learn from them. OTTs, like WhatsApp and many others provide what consumers want. MNOs, Facebook, and OTTs all need each other and can benefit from closer relationships.
With this acquisition and the Viber acquisition, I think the concept of “Mobile-First” might have some legs in 2014. I think it will be an interesting year for M&A, as companies look to incorporate that DNA into their longer-term strategy.