Product Management-Case
Facebook bought Whatsapp for $19 billion, its largest acquisition. Why?
First of all, we need to see that Whatsapp is a great product. Simple to use, lowest latency across all messaging services, and free/ very inexpensive for anyone to use. Whatsapp did away with all the hassles to messaging and communicating with people over texts. It made messaging real time, and changed the world in many ways.
The mission for Facebook is to connect people through photo, video and text sharing. It is important for Facebook that people communicate through its platform, and rightly so Facebook also has a messaging which earlier used to be one of the major chat platforms people use. Then, Whatsapp came along and things started going in that direction. It was a superior product by miles, across its simple aesthetics but mainly because it got one job done and done right. Whatsapp was a great opportunity for Facebook to integrate itself with the lives of its users. After all, as much connecting or communicating you do with Facebook or its many offerings, that much is it important for Facebook in the longer run. Thus, Whatsapp aligned with Facebook’s mission. And it was a clear winner across all emerging chat platforms and a go-to chat application for most people.
One of the things which Facebook couldn’t do well was messaging. Yes, everyone used to use their Messenger when there were no better alternative. We didn’t even know what a better alternative would have been. Whatsapp, in many ways showed that way. So, Whatsapp was a clear acquisition target for Facebook to improve upon its weakness, which was messaging.
Photo, audio and video sharing in Whatsapp clearly meant the businesses would pick this up as one of their channels to reach out to their customers, get paid, and promote and sell their product. This would have eaten into Facebook’s monetisation strategy and thus the pie share. Whatsapp was an emerging opportunity for Facebook towards making its position stronger as a medium between buyers and sellers. And these were the areas with maximum potential for monetisation. Thus, Facebook acquired a clear winner in this area with a huge potential to transform how businesses may be conducted. And it shows vision, since after all Facebook marketplace has still got to cover a lot of ground.
Given the fact that communication platforms such as Whatsapp and several competitors such as Hike, Viber, etc. were coming to fore, it would not have been too much of a long shot to assume that Google and other major companies might jump onto this opportunity. After all, it would have fit into Google’s strategy too given its foray into Payments, promotion of Businesses and Stores. It would have been a big threat for Facebook if Whatsapp would have been acquired by Google, for example. The seamless integration between existing Google services and Whatsapp would have meant covering the market for businesses especially local buyers and sellers. It was also a pro-active move on Facebook’s part to see what it can do to protect its interest and be a one-stop solution for business needs.
Going a little narrow into specific feature, Facebook Group has been something which has been quite important for Facebook strategy. Groups are little worlds in themselves and offer closed communication on top of general ones. Though Groups did see an uptick in terms of usages, somehow petered out for most people. After all, I don’t even know what groups on Facebook I am a part of, whereas I know exactly what groups I am a part of on Whatsapp. So, Whatsapp because of its close relation/ coordination between one-to-one and community communication, did wonderfully well across community communication. This may also been a part of reason behind why Whatsapp was such an important target for Facebook to acquire.
Finally, it is all about the time user spend on Facebook, that it earns its dollars from. If this bandwidth is split between itself and another company, Facebook clearly is losing on revenues, current or potential. Thus, Whatsapp given the fact that users were increasingly spending more time on, either in one-to-one communication or community discussions, was taking a fair share of engagement time for Facebook. Simply, goes to say Whatsapp was a good acquisition target for Facebook.
