In this edition of The Baer Facts, I’m not joined by Kyle Lacy of ExactTarget, but am flying solo and recording from my Mom’s guest bedroom, complete with quilt on the wall, to talk about Facebook’s startling purchase of WhatsApp for $16 billion, plus $3 billion in stock grants to WhatsApp team members.
Certainly, $16 billion is a big number by any standard, and there was quite a bit of WTF? blog posts in the immediate aftermath of the announcement, especially given WhatsApp’s historical eschewing of any advertising, and the presumption that won’t change. I’ve read a lot of potential explanations for this purchase, including the need for Facebook to kick-start its younger audience; the ability for Facebook to mine WhatsApp user data to make targeted ads smarter (although WhatsApp doesn’t store meta data now, so that’s perhaps unlikely); and even that Facebook covets the WhatsApp technology infrastructure.
It of course doesn’t hurt that WhatsApp has 450 million active users (far larger than Instagram); generates a ton of cash flow based on its 99 cents/year pricing model; has only 32 engineers on staff; and has never spent a dime on marketing.
But Here’s the Real Reason Facebook Bought WhatsApp:
All of those are good reasons for Facebook to make this investment. But the best reason is that is is a perfect fit for Facebook’s overall strategy:
Facebook’s master plan is to control all of the world’s messaging (tweet this)
Facebook bought WhatsApp because to continue building and defending its position as the Ma Bell + postal service of the digital age, they must attempt to control any messaging/communication protocol that gains real traction. ANYTHING that people choose to use in great numbers to connect to one another Facebook will be interested in, period. Instagram. WhatsApp. Open Graph. SnapChat. Mark Zuckerberg’s leadership of Internet.org, which plans to provide universal global access to the Net. I’m surprised Facebook didn’t buy Skype, but since Microsoft owns Skype as well as a piece of Facebook, maybe it’s all kissing cousins on that front. Facebook isn’t a social network, it’s a next generation global, mobile telco.
Zuckerberg said WhatsApp is the only system he’s ever seen that is even more sticky and viral than Facebook itself. And it fits perfectly into the master plan of controlling how we connect, which he described at the recent Mobile World Congress:
We want to create dial tone for the Internet. ~ Mark Zuckerberg
Facebook, Google, Amazon Divide the Pie
Facebook wants to dominate the messaging and personal connectivity of the Internet. Google wants to dominate the information and functionality of the Internet. And Amazon wants to dominate the commerce of the Internet.
Of course, these giants overlap at times, but if you take a step back and look at the totality of their strategic moves, they are dividing the world into three huge slices of pie, each big enough to sustain one of them.
My friend Phil Simon’s book The Age of the Platform presaged this development a couple years ago. He’s looking more right than ever.
Are you ready for an Internet dominated by three companies?