Does Acquiring Whatsapp Make Sense For Facebook?

We have been hearing rumors of a possible acquisition of Whatsapp by Facebook. Apparently, both the companies are in talks over a deal, as reported by Techcrunch. To give you some background, Whatsapp is an uber popular mobile messaging app that has gained massive usage because of its simplicity,  cross-platform compatibility and a brilliant pricing model. Facebook on the other hand is a billion user strong and faces significant challenges in mobile monetization.

Well, both of these services are popular and are widely used. Facebook is free and depends on advertising related revenue, although it has recently shown interest in e-commerce via its Gifts service which debuted in the US sometime back. Whatsapp on the other hand is free for a year and then charges $0.99 every year. Whatsapp’s recent numbers have not been released and the only data we could find is that they crossed the 1 billion messages per day mark last year. The company is notoriously secretive about its numbers and has a well documented stand against advertising in products. Whatsapp founders had assured that the service will be a 100% advertising free one, in an official blogpost. Whatsapp also has very less downtime except for a few outages here and there. That is understandable given the massive loads it carries. These days, many other companies have jumped into the chat/messaging app fray. Some of these are Line, WeChat and Samsung’s ChatOn. ChatOn however looks like Samsung’s Google Plus while Line and WeChat are expanding in Asia.

Whatsapp is huge in India! Everyone who I have come across with a smartphone uses Whatsapp as a replacement for SMS and group chats. The service has given considerable pain to Indian mobile network operators as it eats into a steady revenue source from SMS. So much so that carriers like Reliance Communications have actually tied-up with Whatsapp to release cheap chat packages for students. The reason behind Whatsapp’s ubiquity in the country is probably due to its ease of use and the automated contact pulling based on saved phone numbers in phone contact books. You can also send media using the service. Another prominent reason is also the cross compatibility between different OSs that are used in India eg. iOS, Symbian, Windows Phone, Android and Blackberry. This makes it the only true messaging app in the country that effectively makes communication highly affordable.

Does acquiring Whatsapp make sense for Facebook?

Facebook could easily acquire Whatsapp but I fail to see a common path through which both the services could work with respect to their business models and vision. Even if Facebook acquires Whatsapp, it will only get Whatsapp’s users and the resulting data. The data could be parsed through Facebook’s systems and a user’s wants and desires could be analysed. After that blogpost, I don’t see Whatsapp ever showing ads since it will be like the founders went back on their word and that doesn’t sound like a good thing. Whatsapp is a paid app and should be generating enough revenue to get along. They could build more pro features and charge more. Facebook has its own messaging service which is laggy. Instead of acquiring Whatsapp they could look into building a better and faster one for themselves since they have already invested in making a cross platform app. So overall, the ‘rumored’ acquisition doesn’t make sense to me at all because, Facebook has it all and going after another messaging service (not ad supported) just because of its user base and traction does not seem to be a very compelling decision. It somehow depends on the road Facebook is taking in the future. Does Facebook want independent services like Instagram and Whatsapp to add to its portfolio of products or does it want to make Facebook (the service) stronger via these acquisitions? Either path is possible but I highly doubt whether the first one is worth all the effort and cash.

What are your thoughts on this? I would be very interested in hearing them. Share them with me in the comments.

2 Responses to “Does Acquiring Whatsapp Make Sense For Facebook?”

  1. Omkar
    December 3, 2012 at 6:59 pm #

    Facebook does not gain anything out of buying WatsApp. However, they can better their messaging services by integrating WatsApp like services. But then again, doesn’t sound like an ‘ideal’ deal for me.

    • Denzil
      December 3, 2012 at 7:44 pm #

      Exactly! Doesn’t strike like a good one. Instagram made sense.

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