Facebook buys Whatsapp

February 20, 2014

$19 billion. This is the amount of money Facebook is paying (stocks + cash + RSUs) to acquire WhatsApp. I've not been able to process it yet. Don't get me wrong. I'm not questioning the worth of WhatsApp.It is a great messaging app which provides a simple, no-frills and reliable way of communicating with people, sharing images, videos, music etc. I have tried using a couple of other messaging apps and every time came back to WhatsApp. That is how good it is. And ~500 million customers without any marketing is a huge deal that speaks volumes for the product.

But something does not add up. Or maybe I'm too naive to understand it yet. WhatsApp supposedly deletes messages from their servers once they gets delivered. And they want nothing to do with advertising. Two things that Facebook is big on: data and advertising. Which leaves people's contact list, which Facebook already has, in most cases by virtue of being installed on almost every Android/iOS phone out there.

WhatsApp's founder has promised to keep the product and services running as is, without ads. So what is Facebook really getting for $19B? WhatsApp has become the app which has almost entirely replaced SMS and other messaging services for most people I know (speaking for student and professional crowd in India). By becoming the de-facto communication standard of sorts, and being present on every mobile device with a data plan, they have disrupted mobile messaging. Add to it the ability to create groups, and you have a pretty solid product.

Not to mention that you save a lot of money, which is probably why I would be willing pay $5 or even $10 instead of $1/year. I think the fact that it is a private social network with a deep reach (across multiple platforms including Symbian) is a big thing. Also, there is zero effort on the user's part to get started, besides installing the app. You can choose to share content with one or many people, and you only see what people directly share with you. It keeps the noise away. This, in addition to absence of advertising, makes it a good experience for one-to-one or one-to-many interactions.

On the other hand, it makes me think that this belittles the value of the hard sciences, medical and life saving research that people put their lives into. But then, Facebook was also valued at $100 billion+, right?