After hearing about the news that Facebook is buying WhatsApp, I glanced at my phone and noticed the three apps next to each other: WhatsApp, Facebook and Instagram (screenshot above). We have seen companies buying companies before, but the reaction to this purchase is staggering for two reasons:
Firstly, when you look your circle of family and friends, chances are that everyone uses both Facebook and WhatsApp. So this purchase has a direct effect on millions of people using these apps daily. Everyone wants to know: will Facebook now sell ads into WhatsApp ? This makes this purchase very topical and hence the buzz.
Secondly, this news is staggering due to the purchase price. Facebook purchase of WhatsApp for $16 billion is made up of $4 billion in cash, $12 billion in Facebook stock and then an additional $3 billion is Facebook options to WhatsApp founders and employees taking it up to $19 billion. WhatsApp has 55 employees which divided equally works out to around $545 million each…not too bad for a deal that was in discussion for over 2 years but price agreed upon in 11 days.
By all accounts this $16 Billion is a huge number which is best put into perspective by a Tweet from Michael Jordaan:
When it comes to WhatsApps, all numbers are staggering:
- 450 Million monthly active users
- 70% are active on any given day
- platform is growing by 1 Million registered users per DAY.
- 19 Billion messages are send daily
- 34 Billion messages are received daily
- over 600 million photos are uploaded daily
- 200 million voice message are sent daily
- 100 million video messages are sent daily.
With 100% year on year growth on all the above figures, along with the rate of growth the various high profile services in the market (based on comScore Media) , WhatsApp is clearly dominating and growing exponentially:
$16 billion and still no Ads ?
The biggest question on everyone’s mind is will Facebook now shove ads into WhatsApp ? WhatsApp has been an Add free zone with a detailed explanation on the WhatsApp blog citing the famous “We don’t sell ads”
Remember, when advertising is involved you the user are the product
Facebook has confirmed that they have no plans to launch Ads into WhatsApp.
WhatsApp has never disclosed how many people pay the yearly $0.99 subscription fee. I have never had to nor do I know of no one that has actually paid for it – not because of trying to avoid it, but simply we were never asked as the service just extended. Assuming that all of the 450 million active users pay their $0.99 that will bring in $450 million of revenue whilst that is a great income stream, its a small portion compared to the paid-for price (even if you ignore the $12 billion in shares and just try to recoup the $3 billion paid to WhatsApp staff and the $4 Billion in cash).
Remembering that when Facebook purchased Instagram, they did not say that they will not monetise that platform with Ads – so that is definitely coming. Facebook has stated that they will not push ads into WhatsApp – we all remain sceptical. Perhaps no ads into the current WhatsApp that we know but a future iteration of WhatsApp might be different and a plug-into Instagram or Facebook and therefore ads.
But for now, it looks like Facebook just wants to scale up WhatsApp and keep true to its mission of connecting people and WhatsApp falls nicely into his project to connect the next 5 billion people to the internet.
I highlighted that the Mark Zuckerberg key note address at the upcoming Mobile World Congress in Barcelona is a good indicator of Facebook’s push to mobile. WhatsApp fits perfectly into this roadmap.
I will provide more details as I hear them at the address.