Whatsapp & Facebook: the Race to The 1 Billion Club

February 21, 2014

It is all about speed and size.

Just this week I had to write a piece about Viber and in comes Whatsapp and get acquired. For much more.

Why?

I had my share of reading about the Facebook acquisition of Whatsapp. Tens of posts. Best one I found? Definitely Alyson Shontell’s on Business Insider – the 4 numbers of Whatsapp. Get acquainted with them:

  1. 450 million active users
  2. 32 developers
  3. 1 dollar per year subscription
  4. 0 expense in marketing

Not your usual startup.

Context

In terms of the price point that Facebook was willing to pay? Tech Crunch did a nice job in putting 19 billion in context:

$19 billion is…

  • 4x the market cap of BlackBerry
  • Approximately one-third the market cap of Ford
  • 2.8x the market cap of GroupOn
  • Effectively equal to the market cap of The Gap
  • Slightly more than Sony’s market cap (around 10 percent)
  • Around three-fourths the market cap of Delta
  • 7.5 Mark Cubans
  • Almost precisely one-third of HP’s market cap
  • 2 nuclear submarines
  • 62 percent of Twitter’s market cap
  • 76,000 trips to space on Virgin Galactic
  • Almost 60 percent of Sprint’s market cap
  • 25 Instagram acquisitions

That’s the value of 50-something employees. Or more accurately – 32 developers.

Ben Thompson has a great article about messaging – and what makes it such a hot and dynamic space these days.

The 1 Billion Club

The interesting thing here is that 100 million users doesn’t seem that much anymore. It is as if that number is the entry point today – nothing exclusive about it.

A few years ago, Vision Mobile had their watchlist of mobile platforms which they called the 100 million mobile club. If you try to take that notion and place it on mobile apps, then it gets crowded. With messaging apps, you have quite a few players.

Horace Daidu already talked about the race to a billion. His was around operating systems, which he calls platforms. But if you look at it, successful apps cross the boundaries of the operating system and form their own platforms.

If you look at the numbers reported by the messaging platforms of their subscribers, and compare it to telcos, and interesting picture emerges. This picture changes a bit when correcting registered numbers to estimated active numbers:

Telco vs Messaging OTT

The popular messaging apps today can compete with the largest service provider galaxies in size. And they do it with a fraction of the infrastructure and employees. Just think about it: Whatsapp has almost 60% the market cap of Sprint.

Whatsapp was the closest forerunner towards the billion mark. A number that for social/messaging platforms only Facebook has.

The price is exaggerated in any way you look at it, but at least it is an asset that Facebook can actually leverage. While current public announcements indicate that there will be no ads on Whatsapp – nobody stated that the Whatsapp traffic won’t be monetized with ads elsewhere.

If I were Mark, I’d wait a year, and then connect the phone numbers of Whatsapp with Facebook’s user base. After that? Read Whatsapp messages the same way I read Facebook status messages – and use that to push ads over Facebook. With a bit more targeting.

Same data can be used to decide which content to show to whom, and in order to fine tune Facebook’s social graph with information that include the level of intimacy one has with his Facebook “friends”.

And that’s before we even consider trying to turn Whatsapp into an e-commerce platform similar to WeChat and Line.

The rest of the messaging pack?

  • WeChat is the largest behemoth of them
  • Line is next in line. With solid monetization, but not as many users
  • Skype? Microsoft is trying hard not to let it grow and flourish
  • Others are… too small to mention (and still above 100 million)

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Comment

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  1. For me the acquisition is about the second billion users, rather than the first. Zuck wants to connect everyone and in the emerging markets this is easier to do with WhatsApp (a simple messaging platform) than with Facebook (online profiles).

    Well done to the WhatsApp team!

  2. In countries where Facebook is forbidden, people are using Wechat and viber much more than whatapp. It will be difficult to bring them to Appchat since Wechat offer more features. Wechat is more than a messaging app.
    Anyway, it is a crazy price and difficult to undersrand.

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