Facebook announced on Wednesday afternoon that they would be purchasing WhatsApp for $19 billion in cash and stock. For those who aren’t familiar, WhatsApp is an instant messaging subscription service for smartphones. Features include text messages, images, video, audio and location services. WhatsApp is available on all major smartphones including Apple iOS, Google Android and Blackberry OS. WhatsApp has grown to become one of the biggest instant messaging apps in the world with over 190 million monthly active users, 400 millions photos shared each day and over 10 billion messages each day. But is it really worth $19bn?!
This isn’t the first time Facebook has invested in a popular app. In April 2012 Facebook bought giant photo sharing network Instagram for $1bn when it was worth an estimated $500 million. The company faced a huge backlash when they announced plans to use users’ photos in advertisement without payment. The idea was quickly brushed under the rug and no big changes to the brand have been announced since. According to reports, Instagram could earn up to $400 million in 2014. A study was carried out analysing 250 brands who use the platform. The brand could generate $250 million in revenue by using user generated photos to retail sites. User generated photos to retail sites have helped to increase sales to seven percent, and increased average order value by two percent. With a growth in users and no actual figures released by Instagram, it’s hard to say whether Instagram has earned it’s price tag so it begs the question if WhatsApp will follow the same route as Instagram?
It’s easy to see the appeal of WhatsApp, the app offers unlimited and easy connection between you and the ones you love. It contains no ads, is more immediate than texting, has no messaging limits and can easily send a video audio note or image. The app automatically syncs your existing contacts making it simple to get started. You only need a WiFi connection to use which makes it a game changer for texting abroad. On your gap year in Australia and want to message your friend? Easy, find an internet cafe and text to your hearts content without worrying about a nasty phone bill.
It’s no secret that Facebook has been trying to be a part of the instant messaging market with the start of Facebook Messenger. Facebook users are dropping and the younger demographic are turning to ‘cooler’ sites like Twitter, Tumblr and Instagram. Facebook are looking in ways to expand and reach the younger demographic. Realising that another company is dominating that market, their ‘solution’ is to buy out their competitors. $19bn may be an absurd amount of money to everyone else but worth every penny to Facebook as they look expand their brand and continue to dominate the Social Media Industry.