Facebook pays big to connect the World

In the largest Facebook purchase to date, they purchase the WhatsApp in a deal worth $19bn, accordingly to a recent article in the Financial Times.  WhatsApp is an essentially free messaging service that is largely popular outside of the US in emerging markets, according to the article by Hannah Kuchler and Tim Bradshaw. Users pay $1 a year for the service, and then have the opportunity to share messages, photos and videos without the high fees that come along with cell phone usage.  According to the article, “Some 70 percent [of the over 420 million users] send messages on WhatsApp every day, an engagement rate which is higher than Facebook’s.”

It is yet another example of Facebook trying to get ahead of the curve with the growing number of  smartphone users, which as we heard a couple of weeks ago from Michael Saylor, is expected to reach 5bn in the next 5 years.  They have also made a move to separate core functions into apps, to further mobilize the market.  According to Benedict Events, a partner at Andreesen Horowitz, whose co-founder Marc Andreessen sits on the Facebook board, “The elemental point is mobile is much bitter than the desktop and things can happen much quicker- 30 odd guys can get to 450m users.”

This move shows a lot of moxy for Facebook, an organization whose  initial public offering in February of 2012 was tenuous to say the least as the market feared that advertisers would not follow them.  In a recent CBSNEWS article, Facebook estimates that more that 14 percent of its ad revenue now comes from mobile devices.

In a statement from Mark Zuckerberg:

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As proud as I am that a billion people use Facebook each month, I’m also really happy that over 600 million people now share and connect on Facebook every month using mobile devices,” said Mark Zuckerberg, Facebook founder and CEO. “People who use our mobile products are more engaged, and we believe we can increase engagement even further as we continue to introduce new products and improve our platform. At the same time, we are deeply integrating monetization into our product teams in order to build a stronger, more valuable company.

 

The next 12 months will be a great indicator if Facebook made a wise purchase .  But one thing is for sure, Mark Zuckerberg and Michael Saylor are thinking along the same lines.

 

 

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