Last week, it was announced that Facebook had purchased the messaging app WhatsApp for $19 billion. The collective reaction from many upon hearing the news was “What the heck is WhatsApp and why is it worth more than the GDP of many small nations?”
When you purchase a smartphone with a plan from a provider like Verizon or AT&T, that plan normally consists of three parts- voice (telephone), data (the internet), and text (text messaging). Generally, you have to pay for each of these components. The makers of WhatsApp (and other similar text-based services) realized that it would be possible to build a service similar to text messaging that utilized data; meaning users wouldn’t have to pay extra for text messaging. They could just use WhatsApp and pay a low fee of $1 a year, plus the cost of the initial download.
The app is relatively popular in the United States but it is extremely popular abroad in countries like Brazil. The service has 465 million users worldwide and is growing at an incredibly fast rate. Plus, unlike many other popular apps and services, WhatsApp has security and privacy features that help ensure their users data stays private. The purchase also seems to be a part of a major effort on Facebook’s part to bring the internet to parts of the world without regular Internet access.
While the popularity of the app alone makes Facebook’s purchase seem like a smart one, there are some concerns. The biggest of these is that messaging apps like WhatsApp only work because of a loophole in the way that cellular service is currently set up. It is possible that at some point, data plan providers will find a way to close that loophole. Those companies, after all, want you to pay for text messaging. WhatsApp recently announced that is would be providing voice service that provides the app with additional value but gives Verizon and AT&T even more impetus to crack down on them.
Regardless of how the deal works out, the purchase of WhatsApp shows that Facebook is not content with its billion-user empire. They are moving into new space aggressively. Will this be the end of Facebook’s bold moves? We will wait and see.