{"id":50547,"date":"2014-02-21T09:08:22","date_gmt":"2014-02-21T14:08:22","guid":{"rendered":"http:\/\/www.ict-pulse.com\/?p=50547"},"modified":"2014-02-21T09:08:22","modified_gmt":"2014-02-21T14:08:22","slug":"smoke-signals-initial-thoughts-facebooks-purchase-whatsapps","status":"publish","type":"post","link":"https:\/\/ict-pulse.com\/2014\/02\/smoke-signals-initial-thoughts-facebooks-purchase-whatsapps\/","title":{"rendered":"Smoke and signals: some initial thoughts on Facebook\u2019s purchase of WhatsApps"},"content":{"rendered":"

Facebook\u2019s offer price for WhatsApp, USD\u00a019\u00a0million, has been the source of considerable excitement and debate. We jump into the fray with some early thoughts on possible signals and reservations of which tech and app developer communities worldwide should be mindful.<\/em><\/p>\n

\"FB-WhatsApp<\/p>\n

On Wednesday, 19 February, shockwaves went through the global tech community by an announcement that social networking giant, Facebook, would be purchasing WhatsApp, an instant messaging smartphone application (app) for USD\u00a019\u00a0billion (a combination of cash and stocks paid over four years). Released in 2009, WhatsApp’s proprietary cross-platform service had a subscriber base of 450 million as at December 2013, and is reportedly growing by 1 million subscribers per day (Source: Wall Street Journal<\/a>). It is also the fifth most downloaded app on the Android platform, and as reported last week, was among the top five most downloaded free apps in the Caribbean<\/a>.<\/p>\n

Facebook is one of the world\u2019s largest social network. In January 2014, the network had over 1.23 billion users and had a market capitalisation of USD\u00a0158\u00a0billion (Source: Forbes<\/a>). \u00a0Interestingly, it also means that Facebook\u2019s is prepared to give up almost a tenth of its value to acquire WhatsApp.<\/p>\n

What signals might the sale price send to the industry?<\/h3>\n

With just two day passed since the purchase announcement, analysts are still grappling with the situation. For example there has been wide debate over whether Facebook has over- or underpaid for WhatsApp. However, the question that must also be asked is whether such an offer price for a single messaging app could be the start of tech bubble … of sorts.<\/p>\n

Although a true tech bubble might not eventuate, it is likely that on the heels of Facebook\u2019s offer for WhatsApp, the visibility and value of other existing messaging apps will increase considerably. Further, we may also see numerous copycat messaging apps being released, all trying to replicate \u2018the WhatsApp experience\u2019.<\/p>\n

Yesterday, the day following the announcement, there has already been some evidence of the impact of the Facebook-WhatsApp acquisition. First, BlackBerry\u2019s stock rose by 4.3%, which analysts suggested indicates a change in the perceived value of the company\u2019s messaging service, BlackBerry Messenger\u00a0 (Source: MarketWatch<\/a>). Additionally, it was announced yesterday that Viber, another cross-platform instant messaging service with 300 million subscribers, has been purchased by Japanese e-commerce giant Rakuten Inc. for USD\u00a0900\u00a0million (Source: Reuters<\/a>), though that transaction might have been concluded some time ago. However, it is likely that Viber’s value to Rakuten might be considerably more as of 20 February, than it was on 18 February.<\/p>\n

On a separate note, much has been made \u2013 by Facebook and analysts alike \u2013 about the fact that WhatsApp and has been profitable for its owners without having to rely on advertising to generate revenue. In other words, the app does not include any advertisements whatsoever. Among free apps, the sale of advertisements is frequently critical to their business models and a key income stream. However, the fact that WhatsApp has been able to enjoy the success that it has without advertisements, might encourage developers to consider other business models that do not rely as heavily on advertisements for income.<\/p>\n

Under the euphoria, is there still cause for reservation?<\/h3>\n

The sale and acquisition of these messaging services is likely to invigorate app developer communities worldwide with the hope of striking it rich. However, it must be emphasised that the majority of developers struggle to breakeven. According to surveys with app developers conducted by App Promo<\/a> in 2012 and 2013, and analysis conducted by CB Insights<\/a> in 2013 of 1 million apps in the Apple iTunes App Store across 23 primary genres in 155 countries:<\/p>\n