Does WhatsApp deal show Facebook knows what's up?

Feb 20 2014, 4:44pm CST | by

SAN FRANCISCO (AP) — If Facebook hopes to remain the social networking leader, CEO Mark Zuckerberg knows the company must follow the people. That realization compelled Zuckerberg to pay $19 billion for WhatsApp, a mobile messaging application that is redefining the concept of texting while its audience of 450 million users expands at an even faster clip than Facebook itself.

The deal sent shock waves through the technology industry because of the staggering price being paid for a four-year-old service that isn't as well known in the U.S. as it is overseas where WhatsApp has become a hip way to communicate instantaneously.

Although the amount of money involved is difficult to comprehend, the reason Facebook prizes WhatsApp is easier to grasp.

"This is a 'go big or go home' moment for Facebook," said Benedict Evans, a former cellphone analyst who is now a partner with the venture capital firm Andreessen Horowitz.

Just as he did nearly two years ago when Facebook bought photo-sharing service Instagram for $715 million, Zuckerberg is trying to ensure that his company doesn't get left behind as people move to the next trend.

And WhatsApp is what's hot now. The Mountain View, Calif., startup already has nearly twice as many users as the better known short messaging service, Twitter Inc. What's more, WhatsApp is adding about 1 million users each day — more than even Facebook.

The rapid growth has convinced Zuckerberg that WhatsApp is bound to exceed 1 billion users within the next few years to give Facebook even more telling insights into what matters to people. Even at its current size, WhatsApp is already handling an average of 19 billion messages per day. Those daily messages include about 600 million photos. Facebook believes that WhatsApp's messaging volume already exceeds all the traditional texts sent through the networks of cellphone carriers. Those short messaging services, or SMS, generate about $100 billion in annual revenue while WhatsApp charges just $1 annually after the first year of free usage.

By making a big bet on WhatsApp, Zuckerberg is trying to avoid the mistake that one of his heroes, Microsoft Corp. co-founder Bill Gates, made during the late 1990s when the Internet began to trigger an upheaval in business and culture. Gates recognized that Microsoft's lucrative Windows software franchise could be undermined by a variety of new services made possible by the Internet, but didn't act on some his early instincts.

By the time that Steve Ballmer had succeeded Gates as Microsoft's CEO in 2000, Google Inc. was already way ahead in the lucrative field of Internet search and Apple was gearing up to develop the iPod music player that paved the way for the iPhone.

Zuckerberg, 29, is showing his savvy and moxie by moving quickly to adapt to fickle tastes, said David Rogers, a professor at Columbia University's business school and the author of the book, "The Network is Your Customer."

"User behaviors in these digital experiences evolve so rapidly that you can't afford to play the Windows game and say, 'We are the dominant platform so we are just going to hold our position by making little tweaks,'" Rogers said.

Zuckerberg signaled his interest in mobile messaging apps late last year when he offered to buy Snapchat for $3 billion only to be rebuffed, according to several media outlets and technology blogs that quoted unnamed sources. It took less than two weeks to pull of the WhatsApp deal, according to Zuckerberg.

Being nimble has become even more important as smartphones supplant personal computers as the primary way people interact with digital services.

The advent of smartphones has been accompanied by a seemingly bottomless well of free smartphone applications that make it easy for people to hopscotch from one service to the next. The phenomenon has made it more difficult for a single application to become a one-stop shop that fulfills everyone's digital desires.

"The smartphone is a social platform in ways that the desktop computer never really was," Evans said. "A lot of the winner-take-all dynamics don't apply on the smartphone."

Facebook has been adjusting to this reality more quickly than many other Internet companies that began to thrive while PCs still ruled. While Facebook remains the world's most popular hangout with 1.23 billion users worldwide, a lot of its audience turns to other mobile apps for reading news, sharing photos and sending messages.

The fragmentation is prompting Facebook to develop a suite of discrete apps. Besides acquiring Instagram for sharing photos on mobile devices, Facebook recently introduced a new app for perusing news and now is trying to become a bigger player in mobile messaging with the WhatsApp acquisition.

Facebook is "trying to keep its coolness factor with all these different products that could turn them into a mobile media conglomerate," said Virginia Commonwealth University journalism professor Marcus Messner, who studies social media.

Facebook already offers its own messaging app tied to its social network. Although that app is popular in its own right, Zuckerberg noticed that it increasingly had become more like email instead of real-time communication like WhatsApp is. Most WhatsApp users also give the service access to the personal contact lists stored on smartphones, providing Facebook with another potentially valuable source of data.

"This is not an investment in the current value of WhatsApp," Messner said. "This is an investment in the potential of WhatsApp."

Source: AP Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/31" rel="author">Associated Press</a>
The Associated Press (AP) is one of the largest and most trusted sources of independent newsgathering, supplying a steady stream of news to its members, international subscribers and commercial customers.

 

blog comments powered by Disqus

Latest stories

Mummy wearing jewellery unearthed in Egypt
London, Nov 23 (IANS) Spanish archaeologists have discovered about 4,000 years old female mummy wearing rare jewellery in Egypt.
 
 
Exercise and fasting could boost brain's functions
Washington, Nov 23 (IANS) Exercise along with occasional fasting is good for boosting the brain's neurons, shows a new research.
 
 
One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days.
 
 
American whiskey faces challenge in whisky-gulping India
Washington, Nov 23 (IANS) For the most part Indians love things American, but when it comes to their tipple, the world's largest whisky drinkers usually go for Scotch or their very own home-made brands.
 
 
 

Latest from the Network

Boko Haram kills 48 Nigerian fishermen
Abuja, Nov 23 (IANS) Members of Nigeria's armed terrorist group Boko Haram have killed 48 people in an attack on fish sellers near the border with Chad, a media report said Sunday. The attack took place Thursday, but...
Read more on Politics Balla
 
45 killed in Afghanistan suicide attack
Kabul, Nov 23 (IANS) At least 45 people were killed and 60 wounded Sunday in a suicide bomb attack at a volleyball ground in Afghanistan's Paktika province, officials said. "Afghan President Mohammad Ashraf Ghani...
Read more on Politics Balla
 
Switzerland win Davis Cup
Lille (France), Nov 23 (IANS) Switzerland defeated France 3-1 to win the 2014 Davis Cup final at the indoor clay courts of the Stade Pierre Mauroy here Sunday. It is Switzerland's first title at the prestigious event...
Read more on Sport Balla
 
Iggy Pop tries to twerk
Iggy Pop enjoys twerking around his house. The 67-year-old musician has said he was ''proud'' when Debbie Harry made comments earlier this year saying he had been twerking for his whole life. In an interview with The...
Read more on Celebrity Balla
 
Olly Murs still gets starstruck
Olly Murs still gets starstruck. The 'Wrapped Up' singer has met his fair share of celebrities since appearing on 'The X Factor' in 2009, but confessed he still feels jittery when he meets people he really admires such...
Read more on Celebrity Balla
 
John Mayer helped Katherine Heigl to get husband to commit
Katherine Heigl used John Mayer to convince her husband to commit to her. The 'State of Affairs' star - who has been married to Josh Kelley since December 2009 - has admitted that she threatened her now-husband to...
Read more on Celebrity Balla
 
Baby boy for Kourtney Kardashian?
Kourtney Kardashian is believed to be having a baby boy. The 'Keeping Up With The Kardashians' star - who is currently pregnant with her third child by Scott Disick - was reportedly spotted stocking up on blue outfits...
Read more on Celebrity Balla
 
Mila Kunis: Jupiter Ascending was like boot camp
Mila Kunis and Channing Tatum ''got in trouble'' for losing too much weight filming 'Jupiter Ascending'. The 31-year-old actress - who has two-month-old daughter Wyatt with fiancé Ashton Kutcher - admits the futuristic...
Read more on Movie Balla
 
Force India finish sixth in 2014
Abu Dhabi, Nov 23 (IANS) Formula 1 team Force India ended their 2014 season in sixth position in the constructors' championship as its drivers Sergio Perez and Nico Hulkenberg brought home 28 points from the season-...
Read more on Sport Balla
 
Hamilton seals F1 drivers' title with Abu Dhabi win
Abu Dhabi, Nov 23 (IANS) British racing driver Lewis Hamilton clinched his second Formula 1 drivers' title as he comprehensively won the season-ending Abu Dhabi Grand Prix at the 5.5 km Yas Marina Circuit here Sunday...
Read more on Sport Balla