Exactly one year ago, on the day when Facebook announced it was acquiring WhatsApp, I was commissioned by the Economic Times of India (#1 Pink Paper in India) to write my entrepreneurial view of the acquisition.
This was before the e-com / mobile app frenzy had reached dizzying heights as we see it today and people were frightened and shocked at the audacity of the price paid by FB.
I had argued FOR the acquisition and I think my points have played out well. Check out a quick recap and a 2015 perspective!
First a joke!
Fanta Singh was informed that Facebook had acquired WhatsApp (the messaging app) for 16 billion ‘daulars’. Fanta Singh was hard of hearing and did not believe his ears. He asked his friend to repeat, which he did: Facebook was paying 1 lac crores to buy WhatsApp.
On hearing this, Fanta Singh began to laugh hysterically! Later he said, “Arre, what a bewakoof (stupid) that Zuckerberg Paaji is! Does he have bhains buddhi (buffalo brains)? Why did he pay 1 lac crores for an app that is FREE?”
If you’ve had your laugh, let me also earn your respect.
A year ago, I was trying to get a peculiar sized table made. It was a square table that needed to be portable, light in weight and sturdy. After a couple of nerve-wracking sessions with my mom’s carpenter (who always has a 1 cm pencil stuck behind his ear), I was making no progress. The bidi-smelly fellow was just not getting it. In the end, he said, “Alok bhai, don’t worry. I will draw more pictures and send them to you by WhatsApp. You have WhatsApp naa?”
I was stunned.
The War over a Nation – Circa 2014
When Facebook closed the deal, WhatsApp had 450 million monthly users and was adding 1 million users a day! This places WhatsApp as the 3rd largest country in the world and if it continues to grow at the same pace, it will become the largest country in the world!
Now tell me, is US$ 16 billion too expensive to own the world’s largest country-in-the-making?
The biggest shocker in the deal announcement was the revelation that 70% of WhatsApp installed customers use the app every day! That’s 300 million people or the equivalent of the entire population of the USA daily marking attendance!
If I were to tell you that you could have control over this digital population, would you even bother negotiating a price? Would owning a nationality of citizens that have traditionally been the toughest to recruit, famous for being disloyal, fickle, inattentive and mostly inert, be temptation for anyone to resist?
World War I and II were fought by nations to control each other. World War III has begun. Only this time it is companies fighting over digital countries.
Circa – 2015 : WhatsApp has reported a 70 million daily active user base in India. In my opinion, that tops all digital media and also beats Google in India.
The Price of Paranoia
Steve Case is probably the greatest salesman ever born. He took his puny America Online Corporation (AOL) and sold it at an obnoxious, dizzying and spine-chilling price of US$ 160 Billion to the all and mighty Time Warner Corporation in the year 2000.
What was Steve Case selling and Time Warner buying? Pure, unadulterated, untouched PARANOIA.
Mark Zuckerberg revealed his paranoia when he publicly announced that, “WhatsApp is the only business in the world that had better retention and usage than Facebook.” Like Time Warner, Facebook has not understood what to do on all things mobile. It feels helpless and therefore makes wild, bold buys like Instagram (1 billion) WhatsApp (16 Billion), while failing to buy Snapchat for US$ 3 billion
Doubt in 2014: To pay an irrational, insane and obnoxious price to treat your paranoia that might not be true in the first place!
Today, in 2015, if a Flipkart that loses 1 Billion $$ a year is worth 15-20 US$ billion and a tween crazy app like Snapchat is worth 20 Billion, what is WhatsApp worth now?!
Consumer Revenues – Alternative revenue stream
For years Mark Zuckerberg said, “No ads on Facebook.” In the infamous movie ‘The Social Network’, his character avoids falling for Madison Avenue advertising revenue overtures that his now estranged co-founder was trying to garner.
Mr. Koum the founder of WhatsApp, is also very vocal about not having advertising as a revenue source. If you sign up for WhatsApp as a first time user, you will be treated to a “declaration of independence” – a long mobile page that berates advertising and its evils; and how the founders of WhatsApp vow never to pollute their beautiful products by ads.
Grump! So much for saying no to easy money!
So, a lot of people don’t get it. If advertising is bunk, then how will WhatsApp make money?
It’s the address book, silly!
Messaging services such as Japan’s LINE and Korea’s WeChat are demonstrating massive traction with in-app services for consumers such as stickers, gifts etc. Skype makes a ton of money by charging for premium services over its VOIP services.
It’s logical for WhatsApp to become a massive revenue generating monster from its consumer base who will pay a few cents here and there for tricks and treats.
And that suits Facebook very well that currently only depends on ads for revenue!
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What do you think of this deal? Please comment and share your opinion?
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