When a tech acquisition is all over the newspapers and TV, you know that tech, mobile and social are truly mainstream. Ben puts it very well in his tweet.
Spending $19bn on anything will get you a lot of attention. Spending it on a service that most people don’t know that well- because its 450m users tend to be young and in emerging markets – invites some skepticism
But Facebook have the cash – they are giving away around 10% of their value to buy WhatsApp – and have a highly successful means of monetizing eyeballs, so getting a big chunk of extra eyeballs makes sense.
They also have ambitions to grow in emerging markets and this deal certainly helps there;
55 percent of those surveyed by Jana in India said they used WhatsApp the most among mobile apps; less than 1 percent said Facebook was their primary app. And it was a similar story in Brazil (63 percent favored WhatsApp versus 5.6 percent for Facebook) and Mexico (76 percent versus 5 percent).
And when Wall Street values FB at around $140 for each user, getting that extra chunk at just $35 per user make sense too.
But how is Facebook going to make the money that justifies this buy? Advertising is something that WhatsApp have never done and their ‘manifesto’ suggests they don’t want to. And blending ads with messages it less easy than mixing them into people newsfeeds.
Weve and others have shown you can monetise messaging, but WhatsApp don’t have much info on their users – but one imagines that Facebook will be using their customer audience technology to work out just how many people use both services. Linking a Facebook profile to a WhatsApp user instantly makes them more valuable – if advertising is an option. ( You can use your Facebook profile on WhatsApp but it only uses the basic profile)
But maybe WhatsApp will become the FB lab for learning about the new business models – like stickers – that other Messaging apps are pioneering.
VC firm Sequoia talk of 4 numbers that explain the deal; 450m users, 32 employees, the $1 a year they charge users and the 0 marketing spend. Equally impressive is the return Sequoia are thought to make on the $60m they invested – $3.4bn
As well as being a billionaire, one of the funders will be feeling good about being bought by the firm that turned him down for a job back in 2009.
Wired have some good background on the firm and the team. And Ben Evans – now working with Facebook board member Marc Andreessen – shares typically smart thinking.
This deal supports our view that Google, Apple, Facebook and Amazon essentially control the tech world. They have the power and the cash to ensure future innovations get snapped up, rather than become a significant competitor. Google have done more deals than any one else over the past 3 years and whilst they have bought Waze, Nest and Robot companies, WPP – in second place – have spent a lot less buying agencies.
Twitter, Yahoo and Microsoft are all players but don’t shape the ecology like GAFA do
Given a business with just 32 people can grow into a global leader in just 5 years and command a value of $19bn, perhaps we should retire the idea of a bubble? Marc Andreessen talked at this weeks Goldman Sachs conference about tech still being in a depression;
He argued that advances in mobile and chip-making technology signaled exponential expansion of the market. He said tech isn’t overhyped and could have “decades” of growth ahead of it. Echoing economist Carlota Perez’s research, he said world-changing technologies like the web usually settle into a more mature deployment phase after an initial period of hype and investor frenzy.
Thomas Friedman, the author of the hugely influential The World is Flat, is equally bullish on startups – suggesting they are the best hope for the US economy.
And here in London, Mobile Monday held an interesting event looking at startups finance and acceleration, which we wrote up here. Our view is that the big funding investments tend to overshadow the real innovation;
Our take is that too many people focus on the quick win of an accelerator place and funding. The reality is that these are lottery wins – great when they happen, but not something to rely on.
Smart entrepreneurs get their team right and build a business around solving a problem. Getting people to pay for your solution validates your idea and demonstrates you have the grit and persistence to make a success of your business. And that story could well open the doors to the accelerators and the funding.
eBay have published a fascinating report on omnichannel retail. Essential reading.
Smart thinking on Cards from @avc Fred Wilson
We are finding the Yahoo Aviate app a good way to manage our Android homescreen. Well worth trying.
Japanese ecommerce giant Rakuten have been busy; buying messaging app Vyber for $900m and opening a R&D centre in Paris – seeking the next big thing in ecommerce.
MIT have published a report on the 50 smartest companies. Well worth studying.
Finally….. the new Spike Jonze movie Her is about a man that falls in love with his Mobile OS – sort of Siri version 79. Who better to review it than the father of Artificial Intelligence Ray Kurzwell. He finds the whole construct quite feasible – except he sees it as more 2029 than 2025 as the film predicts.
As we started Fix with today, tech is changing things on a huge scale. And it’s not going to stop anytime soon.