Why Zuckerberg Had To Go For WhatsApp

Opinion: With 450 million active users, it has become the biggest messaging service in the world

Never in the history of technology acquisitions has a company’s name been so apt. “What’s the WhatsApp app?” was the tongue-twister on a lot of people’s lips on Wednesday night as news broke of Facebook’s astonishing $19 billion deal to buy the small but hugely successful messaging company WhatsApp.

The deal is astonishing for many reasons, and more than just the collective sticker shock prompted by the price Facebook founder Mark Zuckerberg was willing to pay for it – $4 billion in cash, $12 billion in Facebook stock, with an additional $3 billion in restricted stock units for WhatsApp employees.

WhatsApp is a genuine phenomenon – at first glance it’s a rather basic cross-platform messaging app, offering little more than the text messaging app already installed on your smartphone. But once you have downloaded WhatsApp, you can send unlimited messages to other WhatsApp users, all for a nominal $1 annual fee.

This is a winning formula – with 450 million active users each month, a million new sign-ups per day and a whopping 72 per cent of its users active on the service every day, handling about 50 billion messages and 500 million photographs, WhatsApp has rapidly grown to become the biggest messaging service in the world, with massive penetration in large developed markets, such as Europe, and even larger developing markets, such as India. The clearest illustration of its phenomenal growth came earlier this year, when the number of messages sent on WhatsApp every day overtook the number of plain old SMS text messages sent all over the globe. What’s more, the company is the very epitome of “fast and nimble” – WhatsApp will turn five on Monday and has just 55 employees.

But for all that success, the reason a lot of people had never heard of WhatsApp before is because the company’s founders have deliberately shunned the limelight. Jan Koum, a Ukrainian native who moved to California as a teenager, and Brian Acton met while working at Yahoo, and built WhatsApp with a defiantly anti-advertising, pro-privacy ethos. Unlike every other eager start-up desperate for attention, they avoided publicity.

“Marketing and press kicks up dust,” said Koum. “It gets in your eye, and then you’re not focusing on the product.” They didn’t even put a sign up on their Mountain View offices, with Koum describing it as “an ego boost”. “We all know where we work,” he put it succinctly, suggesting a rather admirable determination to avoid the distracting trappings of the Silicon Valley start-up culture.
Tech bubble
But now that Zuckerberg has signed a cheque with enough room for lots and lots of zeros, WhatsApp is a household name rather than just another generic messaging app. The price was seen by many as concrete proof that a tech bubble is under way – after all, the money involved towers over the $13 billion or so the UN asked for humanitarian relief operations in 2014 and would be enough to fund a dozen or more space rover missions around the solar system if Nasa were so inclined.

In that light, sure, it appears as if Mark Zuckerberg has taken leave of his senses. Indeed, there is every chance that
WhatsApp will usurp the Dutch tulip as a cautionary symbol of irrational speculative hysteria, a monument to the folly of market-based bubbles.


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