What Facebook’s Acquisition of Whatsapp Really Tells Us?
The Big News
Facebook has decided to go into an agreement to buy WhatsApp, which is a massively famous messaging app, for $16 billion in cash and stock. Like Instagram, WhatsApp will continue to operate independently post acquisition said Facebook officials. Facebook also mentioned that with such a massive customer reach Whatsapp can really help Facebook in connecting more people. As part of the deal, Facebook is also giving away an extra $3 billion in restricted stock units to the WhatsApp’s employees. These stocks will vest over a period of 4 years post acquisition.
Two Big Lessons From Facebook’s Acquisition of Whatsapp
There are two big lessons for everyone from this episode of Facebook’s acquisition of Whatsapp.If you are an entrepreneur or a wannabe entrepreneur then you have a great learning from the Whatsapp’s success story. Whatsapp is also a clear example of why user engagement in today’s world is far more valuable than ever before. So, let’s dig deeper a bit.
Missed Opportunities & Spirit of Entrepreneurship
The first one goes in the direction of spirit of entrepreneurship and missed opportunities. Brain Acton is founder of Whatsapp and believe it or not, before bringing Whatsapp to life, he has worked at Yahoo! for 11 years, but after Yahoo! Brain was looking for a job and he actually tried both Twitter and Facebook. Unfortunately, both the companies back then turned him down. This was only after his failed attempts to find a good job, he decided to build Whatsapp by himself and launch his own company. Next, we all know, how big Whatsapp got. This is a clear example for anyone that how even the missed opportunities can also make you do better things in life that you might not have pursued if things would have gone in your favor in the earlier stages itself. Bringing Whatsapp to life and making it huge is obviously the true entrepreneurial character of the man. Clearly, passion and persistence are the key to Brian’s success!
Value of Customers Is Bigger Than The Money
There is no secret that Whatsapp’s business model has been under fire since its launch. Several questions have been raised about how one can make money from a free app. Yes, it indeed introduced $1 a year scheme last year or so, but I’m not too sure if anyone has been charged for it till today. Basically, Whatsapp was never really making money till now and from the investors point of view, it’s just a shitty free app. Yet, we now have this huge acquisition and one should pay a close ear to what Mark Zuckerberg is stressing in all his speeches about the Whatsapp.
Mark has said it very clearly that WhatsApp has a huge montly active user base, which means it opens a lot of door for a company to connect people worldwide in terms of reach. So, what does it mean? This means in today’s era reaching and engaging customers is far more important than making real money from them. It’s about the value people see in your product or service than about you charging them money. I don’t know in which direction this will go for Facebook as of now, but I believe with the ever increasing focus of Facebook Mobile Ads, we can anticipate that there must be something coming on Whatsapp too in terms of targeted mobile advertisement. This multiplies Facebook’s reach of mobile ads and indeed the ad revenues are expected to leapfrog too.
VCs and investors should take a lesson from Whatsapp and the industry should give more respect to product and services that have high customer base and engagement as compared to revenue generation. It proves that the real value lies where there are users, not where the cash is lying!