There won't be any ads (yet), but Facebook's acquisition of WhatsApp is a marketing play
When Facebook acquired Instagram it was easy to join the dots on the reasons why from a marketing perspective. The marketing intention in its $19bn purchase of WhatsApp is less transparent, but it is definitely a marketing play.
Facebook has paid an eye-watering amount to pick up an app that only charges users a nominal fee of $0.99 and does not intend to introduce advertising or other monetisation efforts such as stickers or games. But it has bought defence, data and demographics.
One app at a time, Facebook is taking over the smartphone homescreen. Instagram, Paper, now WhatsApp and more on the way - Facebook is set to have a very big presence at Mobile World Congress next week, including Mark Zuckerberg himself delivering a keynote.
By both acquisition and innovation, Facebook is warding off the threat of competitors such as Google and Twitter and even that of mobile operators by covering off every corner in the mobile arena. Not all of these apps are branded, but Facebook is on a mission to ensure the majority of time spent on the mobile device is in some way linked back to its Menlo Park headquarters.
Facebook already has arguably the biggest index of data on the net and states its long-term goals as looking to “understand the world” and “build the knowledge economy”.
WhatsApp offers Facebook a direct line into the offline world, with access to phone numbers - a data point that is a prerequisite to signing up to the messaging service.
The messaging app also offers Facebook a wealth of behavioural data on a platform that people use differently to its own service. With more than 450 million purely mobile monthly users, and 70 per cent of those active on any given day, the wealth of data offered by Whatsapp about conversations and relationships between users is not to be underestimated - although once delivered, WhatsApp messages are currently deleted from company servers, but at a $19bn price tag, it is likely Facebook will find a privacy-respecting way to tap in.
That gives Facebook the opportunity to make targeted advertising on its own service ever more granular and could even inform how it creates new mobile advertising products.
WhatsApp opens up access to demographics Facebook currently has a challenge to reach: namely emerging markets where WhatsApp dominates over other messaging apps and teen usage.
In October last year Facebook’s chief financial officer David Ebersman admitted that while youth engagement on the site was “stable” overall, it had seen a decrease in daily users, particularly among younger teens. In December that decline was compounded by the publication of Global Social Media Impact Study, which claimed Facebook was “dead and buried” to older teenagers who are migrating to services such as WhatApp, Snapchat, Twitter and Instagram, “embarrassed” to associate themselves with a platform their parents use.
In buying WhatsApp, Instagram before it and reportedly making a bid for Snapchat too, Facebook is aggressively hunting for the next hip thing. WhatsApp is far cooler than Facebook in teens’ eyes because it’s simple, they aren’t being bombarded by messages from brands and there’s no chance of mum writing an embarrassing comment on their profile picture for all their classmates to see.
And about those ads. Whatsapp has promised “no ads, no games, no gimmicks”, saying the intention is to grow the service to reach 1 billion-plus users. But when it gets there, which won’t be too far away as it is currently adding more than 1 million users a day, that contrarian philosophy could change.
Zuckerberg said in a conference call following the WhatApp acquisition that he did not believe ads are the right way to monetise messaging systems. But he then went on to hint that once it grows to “1 billion, 2 billion, 3 billion” people, there are many clear ways that WhatsApp can be monetised - perhaps not via ads as we know them, but a more native form of advertising unique to the service.
Defence, data and demographics: Facebook has bought the killer app.