Facebook has acquired online messaging app Whatsapp for a price north of sixteen billion dollars, dwarfing the price paid for other recent mobile app acquisitions such as the one billion dollars Facebook paid for Instagram or the 1.3 billion dollars Google paid for Waze. The deal has come as a surprise in some circles not only because of the outsized price tag but also because almost no one has heard of Whatsapp – at least not in the United States.
Whatsapp is, essentially, a competitor to Facebook’s own Messenger app. That’s the secondary app which Facebook users are frequently prompted to install on their mobile devices, aimed at replacing text messages and email and traditional AOL-style instant messaging all in one fell swoop. Facebook users already exchange messages frequently within the primary Facebook app or desktop interface, often using it as their primary form of remote communication with their friends and family. But dedicated messaging apps from Whatsapp to Snapchat to Apple’s own integrated Messages all threaten to lure users away from the messaging feature built into Facebook in favor of more specialized messaging functionality. And so Facebook has pushed Messenger heavily, even using an app update to tacitly remove messaging from the main Facebook app and shift it to Messenger by default for those users who already had it installed.
But while Facebook is able to rely on its immense popularity in some regions such as the United States for leverage in pushing Messenger, other social networks dominate in other regions. Facebook’s approximate billion users only account for one seventh of the world’s total population, many of which have internet access but no affiliation with Facebook. That’s because mainstream users in a given region tend to all coalesce around the same social network, making it the default in that area. For instance Hi5 is popular in Mexico, and Renren in China, even though each has little name recognition in the United States.
In the regions where Facebook doesn’t have a significant built in social network user base, gaining traction in messaging requires other strategies, with acquisition being the shortest route. Amongst all my social media contacts in the United States, I’ve never heard any of them even so much as mention Whatsapp prior to this week. And yet a few friends of mine in places like Istanbul, Turkey have long encouraged me to install Whatsapp so I can better communicate with them, as it’s become the default messaging app there, the one app they’re most likely to check regularly or have alerts turned on for – more so than Facebook or any other mobile communications app.
By acquiring Whatsapp, Facebook is buying its way into those regions where it doesn’t already have a foothold – and that often doesn’t come cheap. The long term question is whether Facebook can ultimately leverage the popularity of Whatsapp to steer its users into adopting Facebook as their primary overall social network. But at the least, Facebook now gets to claim dominance in messaging in those regions.