Facebook Acquisition of WhatsApp - A Game changer in the Digital World

The recent FB Acquisition of WhatsApp has created an explosion in the market place, with the analysts of the world rushing to explain the rationale behind the buyout. This is going to change the dynamics of the game. Welcome to the new digital world of tomorrow.

Let us dwell a little into Facebook, the 10 year old giant with 1.2 billion users, whose success is based on an innovative and revolutionary idea that is on the brink of outliving its charm. This can be mainly attributed to the younger generation deserting FB as it has become increasingly populated by the older generation and its inability to adapt to the ever increasing mobile market. According to a study out of the 6.8 billion people on the planet, 4.8 billion have a mobile phone while only 4.2 billion own a toothbrush. A simple fact which asserts that the mobile market, especially the mobile messaging space, is the gateway to success for any dominant player.

Now let's figure what makes WhatsApp popular in developing countries. First and foremost like Facebook it is a free application (for IOS users it is 99cents) and it replaced the expensive SMS as a mode of quick communication. Secondly the ease of use. On installation, it creates a user account using one's phone number as the username and compares all the phone numbers from the mobile's address book with its central database of WhatsApp users to automatically add contacts to the user's WhatsApp contact list. So effectively the average user doesn't have to physically add any users but practically start using the software once it is installed and verified using a SMS. WhatsApp is more efficient than FB in terms of user engagement. It is estimated that smartphone users spend 25% time on WhatsApp in some developing countries. Thirdly, it is the "Network Effect". The average user uses Microsoft Word because everyone else uses Microsoft Word. You use Facebook because everyone else uses Facebook. And you use WhatsApp for messaging because everyone else on your contact list seems to be using the same. That is the reason for the fast proliferation of WhatsApp.

"WhatsApp is on a path to connect one billion people. Services that reach that milestone are incredibly valuable," says Mark Zuckerberg. He has told his employees to only think mobile and that FB's performance in the mobile space will make or break the company. FB has a significant presence throughout the world except China (1.3bn or 19%of the World Population) where it has been blocked since 2009. And though, the no. 1 player in China remains to be WeChat from the local Mobile Service provider TenCent, WhatsApp is present and popular in China.

With this backdrop in mind let's put the blocks together. FB has realized that in the future the most Dominant player in the market place will be the one who will rule the Mobile space. Google and Apple rule the Mobile OS space and FB wants to rule the messaging space with the acquisition of Instagram and WhatsApp.

The question which remains uppermost in everyone's mind is "What will be the revenue model of FB to recover the costs of the expensive acquisitions in the recent past". Facebook has the largest biometric database in the world - and it's all been formed by people voluntarily submitting pictures to Facebook. Every time you label faces by tagging a picture, you're helping build a super-database of labelled faces. Second, you're uploading multiple versions of each person's face, which can improve a system's accuracy. They even bought Face.com in 2012, to bolster its face recognition technology. Now with the acquisition of WhatsApp, FB can correlate the profile picture with Mobile details, making the package accurate and complete. Imagine the power of a database that not only recognizes half the people in the world but couples that with accurate personal details.

Companies are still spending their big bucks on traditional modes of Advertising. Facebook can now offer them a select and niche target audience which the traditional forms cannot. It will now master the art of advertising to selected target audience in which an Advertiser can choose the Age group, Gender, Likes and most importantly geographic region. This will be a game changer for them. Besides Advertising they will probably add up mobile games, integration of a payment system for taxis, e-commerce transactions, wealth management products, bookings for cinemas and restaurants to their portfolio and they have a winner at hand.

The opportunities seems to be endless and we need to see how they will play the game here on and forever change the way we use our mobile handsets.

Nityanand Shetty, Founder and Managing Director of Essen Vision

(The views expressed in this article are those of the author and do not necessarily represent the views of The DQ Week or any of the Cyber Media publications)