Innovation Talk: Growth of mobile is behind lavish WhatsApp purchase

Mark Zuckerberg, chief executive officer of Facebook

Mark Zuckerberg, chief executive officer of Facebook

Mon, Feb 24, 2014, 01:10

There’s a funny YouTube sketch by Dublin’s Pork Street comedy troupe called “There’s Too Many Apps For That”, in which comics Jim Elliot and Damon Blake debate the best way to urgently get in touch with a colleague. They try all the usual suspects with increasing exasperation but without any success – Viber, MessageMe, WhatsApp, Gmail, Hotmail, Facebook, Twitter, Snapchat, Branch, LinkedIn, Instagram, even briefly considering Google+. In the end, the guy just calls them.

The sketch is funny because there is something daft about the proliferation of social apps – they keep springing up like restless mushrooms, and the scale of their growth is almost impossible to grasp.

That much has certainly become clear with Facebook’s $16bn capture of instant messaging phenomenon WhatsApp – a deal that makes the $900m purchase of Viber by Japanese home shopping giant Rakuten seem positively paltry. All the key details, like the 450 million users and the fact that more WhatsApp messages are sent every day than regular old SMS text messages, are evidence of the astonishing scalability and growth potential of the mobile app market today. At this stage we’ve had a few days to digest the significance of Mark Zuckerberg’s latest acquisition, a few days to assess the new technological landscape left in its wake.

Most obviously, it is now as clear as the sun is hot that Facebook’s dictator in chief is not afraid to spend his way out of an incipient case of innovator’s dilemma. The merest hint of disruption to Zuckerberg’s plan for mobile communications hegemony and out comes the chequebook. The first clue was the Instagram purchase (a cool billion, no biggie), then came the Snapchat offer ($3bn, flatly rejected), and now we have this almost ostentatiously inflated acquisition of WhatsApp.

The business model for other messaging apps is now obvious – grow as fast and as big as possible, ideally in emerging markets or among a key demographic, and eventually Mark Zuckerberg or one of his rivals will make a huge offer.

But beyond the price – seriously, are we certain Zuckerberg didn’t make a mistake with a decimal point? – what I found most fascinating was the way WhatsApp founders Jan Koum and Brian Acton immediately began to be treated in coverage as if they have been leading figures in the tech pantheon for ages. The reality, of course, was that they had carefully shunned the spotlight – Koum and Acton were determined to avoid the marketing machine, and that aversion to courting publicity ensured their product became valued for its utility and reliability rather than any image it tried to project.

In fact, I’d argue that WhatsApp’s almost exaggerated blandness, from its generic name to its functional icon, was a key factor in its success. WhatsApp was just one of the more successful of the legion of instant-messaging apps out there, but the identity of the founders never passed my radar. I didn’t even know WhatsApp was based in Mountain View, California. If you’d forced me to guess where the company was born, I’d have suggested Berlin, Tel Aviv or maybe even Bangalore – that’s how inscrutably global WhatsApp had become.

The two Big Bens of incisive mobile analysis, Benedict Evans and Ben Thompson, were particularly illuminating in the wake of the deal.

Evans has long been championing the notion that “mobile is eating the world”, as he puts it – the scale of smartphone growth, allied to the application of Moore’s Law, means that the mobile ecosystem will dwarf what we consider to be the traditional desktop internet. As he recently pointed out: “Some time in the next six months, the number of smartphones on Earth will pass the number of PCs. The entire internet is being changed fundamentally – both the size and the character of the internet are going to look quite different from what we have been used to.”

Evans lays out the key advantages smartphone apps have: they can access your address book, they can access your photo library, they can use push notifications, they can get an icon on the home screen. Perhaps the WhatsApp acquisition is a portent of things to come, and marks a turning point in how we perceive the smartphone – a platform in its own right, with two main flavours in Apple’s iOS and Google’s Android.

Ben Thompson, who is based in Taiwan, points out that WhatsApp’s touted global penetration is somewhat oversold, with the Japanese messaging app Line and the Chinese giant WeChat dominating many Asian markets, as well as building quite different business models to WhatsApp, leveraging their popularity to build advertising and ecommerce revenue.

But while that might make them more valuable as businesses, all Mark Zuckerberg values is attention – Facebook itself is capable of generating more than enough revenue to support a free instant messaging service on the scale of WhatsApp. As mobile eats the world, Zuckerberg is carefully, and expensively, positioning himself to own the communications layer.

So while the “There’s Too Many Apps For That” sketch might be just as relevant in two or three years, the joke might very well be that all these different apps doing the same thing are owned by Mark Zuckerberg. Whether we will find that funny or not remains to be seen.

Sign In

Forgot Password?

Sign Up

The name that will appear beside your comments.

Have an account? Sign In

Forgot Password?

Please enter your email address so we can send you a link to reset your password.

Sign In or Sign Up

Thank you

You should receive instructions for resetting your password. When you have reset your password, you can Sign In.

Hello, .

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

Thank you for registering. Please check your email to verify your account.

We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.