Thursday, 20 February 2014

Partnership or sellout? Facebook buys WhatsApp for $19 billion

In a blog post titled 'Why We Don't sell Ads' WhatsApp cofounder Jan Koum wrote: When people ask us why we charge for WhatsApp, we say “Have you considered the alternative?”

That was on June 18, 2012.

Less than two years later, WhatsApp, not its users, seems to have considered the alternative.

Earlier today, the popular messaging service announced 'a partnership with Facebook'. In simple terms, WhatsApp's has been sold to Facebook for $16 billion.

According to its SEC filing on Wednesday (February 19, 2014), Facebook announced that it was acquiring WhatsApp for a total of approximately $16 billion -- including $4 billion in cash and $12 billion worth of Facebook shares. The agreement also provided for an additional $3 billion in restricted stock units to WhatsApp’s founders and employees over four years subsequent to closing, taking the total deal to $19 billion.

"WhatsApp had every option in the world, so I’m thrilled that they chose to work with us. I’m looking forward to what Facebook and WhatsApp can do together, and to developing great new mobile services that give people even more options for connecting," Mark Zuckerberg said in a statement.

Facebook clearly has its reason for buying out the popular messaging service. In it's filing it cited WhatsApp's 450 million+ monthly users with "70% of those people active on a given say", its messaging volume which was approaching the entire global telecom SMS volume; and its sustained growth trajectory, adding more than 1 million new registered users per day.

"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO in the company's filing. "I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."

WhatsApp on the other hand cited its reasons for 'the new partnership' as being good for growth and expansion.

"Doing this will give WhatsApp the flexibility to grow and expand, while giving me, Brian, and the rest of our team more time to focus on building a communications service that’s as fast, affordable and personal as possible," Jan Koum, cofounder of WhatsApp wrote in a blog post.

But, considering its claims of adding 1 million new registered users each day, the explanation doesn't completely fly.

We don't know yet, whether WhatsApp has been straitjacketed by business pressures, the changing dynamics of communication or the influx of competitors like WeChat, SnapChat, MessageMe and Line or if it's really only because the two companies have a "shared mission to bring more connectivity and utility to the world by delivering core internet services efficiently and affordably".

But, the good news is, both say that nothing will change for the messaging service's users.

Zuckerberg and Koum said that WhatsApp will remain continue to operate independently, users will get the service for a nominal fee and it will stay ad free.

Now, that's what should keep users happy.

In his blog post about why WhatsApp doesn't sell ads, Koum had written:

Advertising isn’t just the disruption of aesthetics, the insults to your intelligence and the interruption of your train of thought. At every company that sells ads, a significant portion of their engineering team spends their day tuning data mining, writing better code to collect all your personal data, upgrading the servers that hold all the data and making sure it’s all being logged and collated and sliced and packaged and shipped out… And at the end of the day the result of it all is a slightly different advertising banner in your browser or on your mobile screen.

Remember, when advertising is involved you the user are the product.

It's still early in the day to know the kind of effect Facebook's acquisition of WhatsApp will have on the messaging service's core product principles, but let's hope, we the users, don't eventually become the product.

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