Whatsapp has been bought by Facebook for $16 billion dollars — plus another $3 billion over the next four years.
Most Whatsapp users (at least in Europe) were asleep when the word spread that Facebook had just bought the messaging app. Waking up this morning the media was full (at least if you follow international aka US sources) with reports about the deal, which is 19x the Instagram deal.
I use Whatsapp on a daily basis — actually I’m just checking it again. It might be an unusual app for US costumers still but not for so much longer. To understand the principle of how Whatsapp works and why it is worth a lot (okay, maybe not all the $19 billion) you need to understand the European market of telecommunication.
Living in Switzerland, right in the center of Europe, brings a lot of interaction with the surrounding countries. In fact, I live in Switzerland, go grocery shopping in Austria, can spend my afternoon in Germany and be back for dinner in Liechtenstein. I can actually see Austria from my backyard. ;)
The way mobile communication used to work, we’re talking late 90’s and 2000’s here, back when it just took off, was totally different of today’s. People used to text a lot but never as much as the average US citizen. Also you pay per SMS (text message) sent — you don’t pay to receive one. (Unless you have a Swiss phone number and are in Austria, which happens a lot to me.) But here comes the real shock for people living in the US: in Switzerland you pay (or used to pay) around $0.10 — $0.25. Only a few cents you might say — but it adds up after a few hundred texts, right?
Then the iPhone showed up — or at least smart phones and began changing the whole game. And they developed to real game changers. Texts now can be sent using your data (internet) connection instead of the actual short-message-system your provider offers you.
This is basically the idea that made Whatsapp big — and brought them all these users (450 million).
Now Facebook shows up — buys Instagram ($1 billion), tries to buy Snapchat ($3 billion) — and pays $19 billion for a free communication service they’re already providing to their 1.2 billion Facebook users. Why is Facebook expanding that fast?
Mark Zuckerberg, founder and current CEO of Facebook, also started another project just about half a year ago. It’s called Internet.org and its mission is to provide Internet to the whole world (aka the two thirds that aren’t connected yet). Whatsapp might be highly interesting for this project as all you need to use it is a smart phone and a working internet connection. That given, everyone will be able to connect and communicate with whomever he wants — wherever you are on the planet, no matter what time or season it is.
As smart phones are becoming cheaper and everyday more and more people have access to the world wide web, this idea might not sound that ridiculous anymore. We see a clearer strategy of Facebook and theInternet.org project with every step they take.
Smart move, Facebook!
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This text also appeared on my Medium blog. Read it here.