Hypothesis 1: Facebook has almost reached saturation in its user base (with almost 1.2 billion members as of today) whereas WhatsApp is on a fast growth track that, as Mark Zuckerberg puts it, “dwarfs anything we have seen”.
Hypothesis 2: Aiming to be the ultimate platform for the entire web experience, Facebook has no other way but growing organically on mobile and other verticals.
In the light of the above hypotheses, Facebook’s acquisition of WhatsApp for a staggering $16+3 billion may in fact seem rather reasonable. Though some do not agree, Zuckerberg’s depiction of the figure as “incredible” is quite right. The addition of 450 million messaging users to Facebook’s mobile realm is pretty incredible, especially when FB Messenger has so far failed to get the attention of the masses.
Furthermore, even with its current large user base, WhatsApp is still not particularly popular in the US, meaning there is huge potential to instantly add another 50+ million users with a little push from FB. This recent move is cheaper and less risky than investing additional years and millions to grow FB Messenger into a global stand-alone messaging tool when they can instantaneously acquire an existing, successful model, with ever-growing young clientele.
Zuckerberg told investors that the WhatsApp acquisition will help FB speed up its expansion into mobile services, according to the Forbes. “Facebook has been on a journey toward becoming a mobile company” he added.
In terms of geographical expansion, on the other hand, Facebook still has lots of work to do to establish itself in the Middle East and Africa, where most web users go online via mobile devices. Too complicated to log in and chat on a relatively less smart device, FB Messenger lacks appeal for the young population where Whatsapp is the preferred messaging app thanks to its user-friendly and sleek design and functionality; as is the case in many other regions.
The acquisition was not a surprising manoeuvre after all, in a growth strategy focusing on the acquisition of established verticals on mobile. The Instagram acquisition in 2012 was the first major step, which revitalized the mobile image sharing service of Facebook via a loose integration. They kept Instagram independent but with improved social sharing ability.
News aggregation: A third front for FB in mobile
Based on the pattern that Facebook follows – buying Instagram to rule the photo sharing traffic and adding WhatsApp to conquer the instant messaging market – one can’t help think the third major acquisition may come in the field of news/feature article sharing, where Facebook has recently hinted at the intention to dominate through the launch of Facebook Paper.
Currently available only in the U.S., FB Paper is another news aggregator with subtle differences from Flipboard, its most similar rival. It has the same tiled frontscreen and customizability. Though FB Paper now heavily depends on feeds coming from the FB pages of news providers or friend timelines, Flipboard provides a wider range of choices to the reader to set up their own front page and categories.
And Flipboard, as we all well know, is very successful business-wise. Very much like WhatsApp’s growth trend, Flipboard’s user base has more than doubled to reach over 100 million in just a year, heading for 150 million users in 2014. It is the first choice of most (and mostly young) mobile users who want to see instantly updated news on their smartphones or tablets, provided by their favourite news institutions.
It would also be much easier to start capitalizing on the established user base of the mobile magazine. It has a straightforward revenue policy based on ads, the incomes from which are shared by Flipboard and the owner of the host article where the ad is published.
Flipboard therefore looks like an attractive target for acquisition, based on both growth potential and market leadership in a zone which Facebook apparently wishes to dominate. However , any proposal to Flipboard may prove futile. Google approached to the company in 2010 for acquisition, but the founders McCue and Doll rejected the offer, saying they would rather stay independent. Back then, Google was said to launch otherwise its own news aggregator and sharing service, named “Google Propeller”, to flatten Flipboard. That never happened.
After all, Zuckerberg looks willing more than ever before to invest big on most popular mobile services and technologies, either creating its own in-house or buying a big player in the market. And his definition of autonomy is very different from that of Google’s. Given the examples of Instagram and WhatsApp, the 10-year old social network with users having started to show signs of boredom will likely have to follow Zuckerberg’s strategy of acquisitions. Our money’s on Flipboard for the next target in 2014!