Today, we hear several stories about acquisitions and mergers: businesses buy other business, in the hope to expand in a current market or create a presence in a new one. Recently, one of the largest acquisitions took place.
Last week, Facebook made headlines by announcing is purchase of Whatsapp for a substantial $19 Billion. In comparison, this purchase was 19 times larger than their acquisition of Instagram, which was purchased at the time for $1 Billion in 2012. Whatsapp is a multiplatform messaging service for iOS, Android, Blackberry and Windows Phone. The messaging service uses data to send messages instead of SMS text messaging, meaning users won’t be charged to message.
What makes this interesting is that Whatsapp has multiple user-friendly features; however, these features are difficult to monetize, which begs the question: Why did Facebook buy Whatsapp?
In my opinion, Facebook bought Whatsapp not to make money off of the service, but for the information, and control. At one point, Google reportedly made an offer to purchase Whatsapp for $10 Billion, showing that even Google isn’t afraid to spend cash to increase control.
About the purchase, Mark Zuckerberg said that Facebook’s mission “is to make the world more open and connected.” I believe that this statement says that Facebook wants to continue growth is the mobile space, as they foresee it playing a large role in the future. By owning Whatsapp, they have several million users going through them and using their service. Currently, Whatsapp has a user base of approximately 450 million people, and that number will presumably grow in years to come.
Going forward, I think that Facebook will continue to make acquisitions similar to Whatsapp, and this will be the main focus. Although purchasing companies that will help you make money is an end goal, there are time where having control is more valuable than money. It appears that Facebook wishes to have majority, if not complete control over the mobile space, and this could help the company in the long run, since people wishing to use specific mobile services must go through Facebook to do it. In the future, I am curious to see what company Facebook will decide to purchase, but we’ll have to wait and see to find out.