Facebook's bid to take on Google
The $19 billion USD that Facebook spent to acquire WhatsApp
yesterday has delivered one of the world’s most stunning stories of
wealth creation. After just ten days of discussion with Facebook, a
principled developer from the Ukraine became worth $6.8 billion
USD, overnight.
That principled developer is Jan Koum, the cofounder of Whatsapp,
whose famous words, “No ads! No games! No gimmicks!” are already
being canonized by various news outlets. Perhaps they're a
refreshing counter to Zuckerberg’s refrain about Facebook’s mission
to “make the world more open and connected,” which may never shake
its association with his nervous, sweaty, stumbling reply to
questions about Facebook’s privacy policy at the D8 conference back
in 2010.
Despite being at the epicenter of one of the most shocking deals in
the history of tech acquisitions (for context, Whatsapp's valuation
exceeds Whole Foods, Gap, and Sony), Koum seems to be against hype.
He's the kind of guy who tweets things like “If you run a startup
and your goal is to get on Techcrunch, you are doing it wrong… Next
person to call me an entrepreneur is getting punched in the face by
my bodyguard,” as Tim Bradshaw at the FT notes.
Theories for the scandalous price tag include the possibility that
Facebook wants to leverage WhatsApp’s crazy growth
and presence in emerging markets, especially since mobile
is driving
all of Facebook’s revenue growth. Sarah Lacy at Pando
claims, however, that it’s not the teen demographic – dubbed
“Facebook-nevers”
– that the social network is after, nor its global presence,
but photos: WhatsApp is processing 500 million photos a day,
and Facebook wants to own photo sharing.
Maybe; another large possibility is that Facebook is simply chasing
its biggest competitor: Google.
“Facebook wants to own every vertical,” argues Abed Agha, the
founder of Vinelab, a talent
management and entertainment agency, based in Dubai with offices in
Beirut.
“Google has the services and is trying to build its social graph;
Facebook has a social graph, and is trying to build services on
top. Facebook needs to scale its services so that it can compete on
Google Ad inventory,” Agha illustrates. By building in the content
space with Paper, and snapping up companies in photo and messaging
segments, Facebook is building an empire that could one day rival
Google’s reach, he argues, pointing out that one of the main
products that Facebook is missing is a video platform.
Zuckerburg has said that Facebook will maintain WhatsApp as an
ad-free service, at least for the next few years, as it focuses on
continuing to outpace its chat service competitors, TechCrunch
reports.
Yet that doesn’t mean that WhatsApp’s data privacy policy will
remain intact. Currently, WhatsApp does not collect the personal or
demographic information that Facebook and Google use to target ads,
Bradshaw notes.
If Facebook is looking to take on its biggest rival, will that
privacy policy remain?
After all, WhatsApp isn’t the only service adding
1 million users a day. Users who are concerned about privacy
have been joining Telegram,
an application that allows to send heavily encrypted messages that
can self-destruct, in groups of up to 100 users. Thanks to a focus
on privacy and security, it’s been
called “the answer for those that want to move away from
WhatsApp.”
Telegram lags far behind WhatsApp in terms of users. As of October
2013, it had 100,000
daily active users, as compared to WhatsApp’s 315 million daily
active users, or an estimated
72% of its 450 million total active users. Yet evidence
suggests that Telegram may be adding 1 million
users a day, swiftly closing ranks with WhatsApp. Most of its
users, a Russian site reports, come
from the Middle East, specifically from Saudi Arabia, Oman,
Bahrain, and Lebanon.
If Facebook is looking to take on Google, the WhatsApp acquisition
may eventually seem like a small price to pay if Facebook can
extend its ad reach to a broader, swiftly growing global user base.
Or, better yet, perhaps it will leverage WhatsApp’s $1 USD per year
subscription policy to get users to eventually pay for Facebook
products.
Yet how loyal are users to a chat platform? If Facebook confuses
WhatsApp users about its data privacy, as it’s done numerous times
on its own platform, will users abandon WhatsApp for something more
secure?