dimanche 23 février 2014

What I learned from Facebook buying WhatsApp

I'm sleepless from enjoying the Sochi Olympics the last fortnight, so I wonder if I'm dreaming when I reflect that Facebook is acquiring WhatsApp for 19 Instagrams.
What I learned from consuming vast quantities of articles is that it really is a big deal. Before I go get some shut-eye, I offer this summary from my raw notes.
1. It's all about the data. One of the most massive data-mining machines in human history now owns WhatsApp's 450 million cell phone numbers, the graph of connections between those numbers, and keywords from 19 billion messages sent every day. (Not to mention 600 million photos, 200 million voicemails, and 100 million videos every day!)
The words of Sheryl Sandberg come to mind: "Facebook accounts for more mobile minutes in the U.S. than YouTube, Pandora, Yahoo, Twitter, Pinterest, Tumblr, AOL, Snapchat and LinkedIn combined." Add Instagram and WhatsApp, and we have one organization collecting massive quantities of data about the interconnected activity of massive amounts of people all over the world all the time.
2. Zuck bought a friend. The history of Facebook is about evolution through combining startups whose founders Mark befriended: The price of each major friend in the progression goes up by a factor of 20, from Parakey to FriendFeed to Instagram and now WhatsApp. These friends offered significant enough time and feedback to influence Mark Zuckerberg's strategy for Facebook, continually improving the company focus and culture.
Facebook began life in 2004 with social DNA, several of Zuck's friends, and his philosophy of "move fast and break things". Facebook's very first acquisition Parakey in 2007 added deep understanding of The Web. Buying FriendFeed in 2009 combined that social-Web platform with profound understanding of news feeds and LIKE buttons. Adding Instagram in 2012 gave Facebook deep appreciation of mobile smartphones. With WhatsApp now, Facebook solidifies its organization as a truly worldwide one, adding a lean team with processes that efficiently run a massively scaled global service.
The $19 billion friendship is on a whole new level, forget about the price tag: Mark Zuckerberg demonstrated his extreme trust in Jan Koum by asking him to serve on Facebook's Board of Directors, where Jan will literally be one of Mark's bosses. I believe we become like the people we spend our time with, so all those long walks together will effectively make Mark's values become more like Jan's, and vice versa. Anyone who has started a company knows how lonely and isolating it can be; by choosing Jan, Mark is now together with a friend who shares the mission to connect the entire world through software.
3. WhatsApp is "on its way to connecting 1 billion people", declared Mark Zuckerberg in his post. A billion dollars isn't cool; a billion USERS is cool. I can count on one hand the number of Internet services actively used by a billion people every month: Google search, YouTube, Facebook, and soon TenCent. WhatsApp could someday have more active users than all of those services, as the number of people with smartphones in the world grows from 1 billion now to 5 billion in 5-10 years. Actually, that point is worth repeating.
4. There will be 5 billion people with smartphones in the world in 5-10 years. Which is why Benedict Evans of a16z said about the WhatsApp deal, "Mobile is the next computing platform and it is several times larger than the desktop internet." And John Lilly of Greylock emphasizes another sentence in Evans' post: "[Mobile is] in a ‘pre-pagerank’ phase where we lack the right tools and paths to find and discover content and services efficiently." Mobile is big. Really big. Really, really big. And it's only just beginning.
5. It is difficult and rare to get 20 million active mobile users, a fraction of a billion. It's hard to get good data on this so I cite the Flurry study that only 32 app developers have a global audience of greater than 20 million monthly active users. I guess that number is 31 now that Facebook and WhatsApp are combining. Why so few big winners? Because "mobile distribution remains extremely hard", to quote Semil Shah and every mobile developer on earth. Mobile users have app fatigue already, and it's only 2014.

6. Google would have paid more for WhatsApp if given the opportunity. Yes, Larry Page would have spent even more. And he would have been right to do so, because...
7. WhatsApp's cost per user at the deal price is freaking cheap. As the worldwide leader in social messaging apps, WhatsApp's cost per user at the deal price was $42. Compare that with the current market caps of Facebook ($141/user), LinkedIn ($85), and Twitter ($84). WhatsApp is also growing faster and has higher engagement than those 3 services: it's adding 1 million users a day, and 70% of WhatsApp users use it every day.
8. Yahoo Messenger, MSN Messenger, AIM, and BBM all blew it. All missed the golden opportunity to build an app for iPhones and Android phones like Facebook and WhatsApp. Then again, not even 3 years ago could anyone predict the top mobile messaging app — WhatsApp's current dominance happened very quickly.
9. I truly believe WhatsApp is in it for the mission, not the money. I read Jan Koum's rags-to-riches story and I'm struck by his mission to make excellent inexpensive messaging available to every person on the planet. I believe he will continue to fight for that mission, just like Mark Zuckerberg strives to "make the world more open and connected."
10. Most-read articles by LinkedIn Influencers on WhatsApp are: major companies worth less than WhatsApp, why WhatsApp is worth $19 billion to Facebook, danah boyd questioning that valuation, and what if WhatsApp had stayed independent.
I've concluded that Facebook using 10% of itself to combine with WhatsApp was definitely worth it in a future world of 5 billion smartphone users... and beyond.
And this is a wake-up call: What's the next app a billion smartphone users want?
Because that application is waiting to be built.

Have an opinion? We'd all love to hear it in the comments...

"FB at 500m" photo credit goes to Paul Butler on the Facebook Engineering Blog in 2010.

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