RIP WhatsApp? That's the first thought that came to my mind when reports hit that Facebook had apparently negotiated to buy the cross-platform messaging service to incorporate it into Facebook's own software portfolio.
That's right, according to a release from Facebook today, the social network everyone loves to hate is buying out WhatsApp for a total sum of USD$19 billion. This apparently breaks down as $4bn cash and $12bn-worth of Facebook stock to be distributed among WhatsApp's staff; plus, perhaps interestingly, a further $3bn in restricted stock. The reason this restricted stock is interesting is because it requires the staff members to remain at Facebook for four years before it vests, allowing them to monetize the stock; those who leave beforehand forfeit their share. In other words, everyone who works for the company now is getting has a huge incentive to stay on.
For some, Facebook's offer of restricted stock shows the company is interested in the talent that worked on the service in addition to the platform itself - which could be seen as an investment in sustaining WhatsApp's future as the most popular cross-platform mobile messenger, ensuring it will be kept going for the foreseeable future through the guidance of its original staff. This has done little to alleviate concerns by others that the merger will result in dilution - Facebook itself is already fairly splintered as it is, with its purchase of Instagram last year, as well as several home-grown apps for Facebook itself - which makes it difficult enough already for people to understand what Facebook means when it talks of "Monthly Active Users". And when Facebook already has its own private messaging system, email and the Facebook Messenger client, will they really spend a lot of focus on another chat platform that connects users to each other through their phone's data allowance?
A look at Facebook's own rationale for the deal seems to suggest that the main purpose of doing the deal was a numbers game, bringing WhatsApp's large, active user base into Facebook itself:
WhatsApp has built a leading and rapidly growing real-time mobile messaging service, with:
- Over 450 million people using the service each month;
- 70% of those people active on a given day;
- Messaging volume approaching the entire global telecom SMS volume; and
- Continued strong growth, currently adding more than 1 million new registered users per day.
However, perhaps Facebook DOES have an incentive to care about keeping WhatsApp alive and keeping its users rosy - money. Unlike Instagram, which has never monetised itself, WhatsApp has been a profitable enterprise that makes its money simply from being used - the service as of late charges users yearly subscriptions to utilise the entire app, at a cost of 69p (99¢) per year. Times 70% of 450 million users, and well... let's just say, that's a LOT of money potentially being raked in every year.
Time will tell what befalls WhatsApp in the future. Until then, cast me as a doubter. I wouldn't be alone either - latest reports indicate Wall Street investors have sent Facebook’s shares down 5% in after hours trading following the news. Then again, similar losses also happened when Facebook bought Instagram and a number of other services, so perhaps we can take the stock broker's opinions with a pinch of salt. With many people seeing Facebook's own stock as toxic even before such deals, any news has the potential to be bad news to those risking their money to play the game - so perhaps we should give it time to see whether the deal will be a winner or a loser.
