What did Facebook REALLY just buy for $19 billion?
As most of the planet knows, Facebook has purchased WhatsApp—an instant messaging application that’s figured out how to get around phone companies’ text charges. This is a big deal in some countries, where a single text message can cost 25¢ to send. It’s largely why WhatsApp has taken off around the world and has nearly half a billion users. The application is gaining ground here in the US, too. My sons (my fountains of info for all things digital) told me about WhatsApp six months ago.
One company buying another isn’t exactly breaking news, but the price tag for this transaction surprised even some hardened Wall Street types: $19 billion!
That’s a lot of coin. Especially when you consider that WhatsApp pulled in only $20 million in sales last year, according to the Wall Street Journal, and is comprised of only 55 employees. ABC News reports that WhatsApp’s purchase price makes it valued higher than Xerox or American Airlines. Yeow.
So, why did Facebook founder Mark Zuckerburg pay so much? The financial world has been pouring over Excel and rubbing its temples, trying to figure that one out.
In a statement at the Mobile World Congress, Zuckerburg called WhatsApp the “most engaging app we’ve ever seen … on mobile so far.” Those are powerful words from a social media kingpin, and it gives us a reasonable clue why this went down.
Most people speculate that Facebook bought WhatsApp for its mobile prowess—lots of experts and industry types have complained that Facebook has fallen short in the mobile arena. It’s a similar motive to them buying Instagram (for a mere $1 billion)—because that platform is infinitely better at using imagery and photos than Facebook, and that’s what markets are demanding. At least right now.
I suspect there’s at least one other important reason for the purchase, though, perhaps something deeper. To me, Zuckerburg and Facebook just bought back some audience.
WhatsApp is extremely popular with younger people. The application, like many others before it and since, took off with teens first. And what audience is Facebook hemorrhaging the most? Right…
So, yes, Facebook bought its way into the image revolution with Instagram—but it also happened to pick up the millions of women who use the increasingly popular platform every day. Women whose time was being taken away, one pretty snapshot at a time, from Facebook.
Now, more teens are back under the Facebook umbrella, with the WhatsApp purchase. And what’s a tech or social company without adoring teens?
For Facebook, these purchases have a huge technological advantage, yes. It puts the platform back at the cool kids’ table in the cafeteria. But these acquisitions also have a big branding advantage for the social media behemoth—it’s gained audiences and, perhaps more important in this space, relevance.
Zuckerburg is thinking of the future of his enterprise and remaining a dominant player in a game that continually evolves to the whims of its audience. The price for that so far? About $20 billion.
– Andy Badalamenti is the creative director for CI-Group