So why would Facebook chose to pay $19B for a company that was valued between $2B – $4B only a few days ago. The answers are not too difficult to gaze. Whatsapp falls directly within the purview of Facebook’s mission statement, i.e. to make content sharing easier for people. Furthermore acquiring Whatsapp also abates the possibility of a potential competitor buying Whatsapp and using its unique user data to challenge Facebook in future.
How does it impact you as a user?
Facebook has denied all possibilities of introducing adverts on Whatsapp to make more money. According to Facebook, Whatsapp is already profitable with over 450 million users and with subscription plans in place there seems to be no need for adverts. So if every user paid $1.00 per year, Whatsapp would end up making $450 million every year with its current user base. If this grows to a billion over the next year, Whatsapp would be a churning a $1B every year. So does this mean it won’t have any effect on adverts? Not very long ago Facebook was accused of scanning people’ private chat messages and sharing the data with advertisers to customise their ad content (BBC 2014). Imagine if Facebook now has access to all your street messages and late night chat. So if you discussed your holiday plans to Spain with your mate on Whatsapp, be prepared to see some adverts promising you best deals in Costa Brava. Sounds bizarre? Try making a mistake on MS Word and see how you are corrected. With new technology in place it might be perfectly viable for these tech giants to scan people’s messages, make sense of the conversation and customise their ad content.
How does it affect you as an advertiser?
Really well. More the information, better your ad targeting works. With the advent of real time bidding (where advertisers can bid when a user is interested (not necessarily looking) for something as opposed to advertising on probable content or keyword) this could help Facebook enhance its RTB experience for advertisers. This can help you target your adverts more effectively, minimise waste and maximise ROI.
Lastly, how does it affect Facebook?
Facebook will gain from getting insights on how and why Whatsapp users have a higher engagement than Facebook on mobiles. This data can be used to improve Facebook’s mobile experience for its users. As better ad targeting enriches advertisers ROI they would be enticed to spend more and more on Facebook until their ROI falls. This in turn is likely to increase Facebook’ revenue and grow the company further.
Should you care?
It depends on how fussed you are about your personal information being used for commercial gains and customise your content. Just like it helps your local hairdresser to customise its services for you without knowing your name, customised advertisements can be conducive to an enriching search experience without sharing your personal details.
BBC 2014, http://www.bbc.co.uk/news/technology-25584286