Facebook’s purchase of WhatsApp shows that the market for messaging is far from dead. But it’s just gotten worse for the telcos. We’ve already discussed the underlying reasons in a report — but the fact that Facebook put $19 billion on the table, of which $4 billion is in cash, for a global messaging service with 55 staff should scare telcos, with their millions of employees and high-cost structures. Over-the-top communications tools like WhatsApp, Line, KakaoTalk, WeChat, and Viber (which itself was bought a few days ago by Rakuten) have pushed telcos further and further away from any meaningful customer engagement.
To be sure, WhatsApp is about much more than instant messaging; it’s about content sharing — which is an emotional activity. Such emotional activities are critical to closer customer engagement. As the online giants use ever more granular user analytics to cement their position as marketing powerhouses, telcos’ hopes of developing new revenue streams from analyzing user behavior are slipping away faster and faster. This is what makes the deal so dangerous.
Of course, it’s tough to justify the deal simply on the basis of WhatsApp’s revenue model of $1 annual subscriptions. In my view, the deal is really about:
Bringing a major competitor into your family. Otherwise, someone else could have lured WhatsApp into theirs. The deal, which accounts for about 10% of Facebook’s market capitalization, could be seen therefore as an insurance cover.
3. 70% of MAU use the service daily (Source: TechCrunch)
4. WhatsApp offers users in Europe, Brazil and other emerging markets (= net new audience) (Source: Gravity/Techcrunch)
5. Nearly 200 minutes of usage each week (Source: Mobidia)
6. Facebook gets how to monetize mobile through paid advertising without wrecking the user experience. (In Q4 2013 they crossed over from 49% of revenue from mobile to 53% from a base of 945M mobile monthly active users) Source: Facebook, TechCrunch
Why $16B to $19B? I am not a financial analyst, but here are a few thoughts:
- Facebook generated $1.37B in mobile revenue in Q4 2013 on a base of 945M users ... annualized that is $5.80/MAU (monthly active user)
- WhatsApp already generates $1/user for a chunk of their users through a subscription fee (less fee to app store?)
- If WhatsApp users can be monetized at the same value, that adds another 50% approximately in mobile ad revenue
- Facebook reported 914 minutes of use on mobile per month in 2013 (Source: allthingsd.com)
Around 60,000 global movers and shakers of all things mobile once again descended upon Barcelona to attend the leading annual mobility event, the Mobile World Congress (MWC). This year’s main themes centered on metadata analytics, the customer experience, and over-the top business models:
The big data opportunity fueled the fantasies of almost all MWC attendees. In the case of telcos, data analytics is seen as the driver for improving the customer experience and developing new markets. Telcos talked a lot about the opportunities of analysing user behavior and turning user data into the new operator currency. The context- and location-aware nature of mobile solutions makes the big data opportunity particularly attractive. However, despite the talk, there were practically no case studies of operators that have succeeded in monetizing data on a large scale. Progress regarding data monetization is slowed down by a lack of clear business models, but also by an OSS/BSS infrastructure that does not support real-time or near real-time analytics. Moreover, privacy concerns also act as a drag on the uptake of data analytics. Equipment vendors such as Nokia Siemens Networks, meanwhile, showcased their customer experience management and analytics solutions for telcos. The solution combines analytics and the actions that operators must take to correct or improve the end user experience, such as a level one call handler pushing the correct settings to a phone or a marketing manager setting up a marketing campaign.