In Facebook's $19 billion purchase of WhatsApp, the world’s most popular messaging application, it's easy to see who comes out on top. Less clear is who will wind up getting the shaft, though it seems highly likely that WhatsApp's users are going to come out on the losing end.
The deal nets the social network a fast-growing, international user base and some street cred in the burgeoning global-messaging market, where Facebook had long been a marginal player. It also takes out a social competitor that one day could have potentially threatened Facebook's dominance. And while $19 billion is a breathtaking sum—it's the largest venture-backed acquisition in history—it's still eminently affordable for the social giant.
WhatsApp investors, founders and employees stand to benefit handsomely as well, not least because Facebook will dispense restricted stock grants worth $3 billion to keep its talent around.
WhatsApp's users, meanwhile, are about to become part of the Facebook product, whether they like it or not.
Both Facebook and WhatsApp insist that the deal won't change anything where WhatsApp messaging is concerned. In particular, they insist that WhatsApp will operate independently of Facebook and that it'll stay free of advertising.
There's no reason to doubt the former point, at least in the short term. Facebook made a similar promise almost two years ago when it bought Instagram, and it's still so independent from Facebook that the only way to tell Instagram belongs to the social network is to visit its help pages.
On the other hand, the one major change Facebook brought to the photo-sharing service is that its users now see ads. Of course, WhatsApp has long been militant about its no-advertising stance, even featuring this quote from Fight Club on its home page:
Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need.
—Tyler Durden, Fight Club
You have to wonder how well that goes down with the advertising machine that Facebook has become.
But the issue for WhatsApp’s 450 million monthly users—a group both companies say is growing by a million registered users every day—goes well beyond advertising. Those users may not realize they’re about to be sharing their online conversations with Facebook. Some might not care, but anyone who flocked to WhatsApp precisely because it didn't seem to want to know everything about them will likely be miffed.
WhatsApp is a free download from most mobile app stores, but the service itself isn’t free. In order to stay ad-free, WhatsApp charges users 99 cents a year for the service, with a free year thrown in up front.
And now that the service belongs to Facebook, users won't be paying with just money, but also with their personal information.
Facebook has access to all of WhatsApp’s data—users’ phone numbers, address books, and payment information. Facebook was previously unable to tap these resources unless people connected their address books to Facebook Messenger, or provided Facebook with credit card information to donate to various non-profits.
Now Facebook has access to even more personal data—specifically, information that many users wouldn’t willingly give up before. In return, people get better-tailored advertising and, potentially, the ability pay for things on Facebook. That may strike some, even most, WhatsApp users as a fair trade, though you have to wonder.
You can see why Facebook, which still hankers to "connect the world," was so anxious to close this deal. More than a billion people already use Facebook, and it's aiming to get the next billion users through global expansion, specifically in developing countries and those with growing economies.
According to a report released in November 2013, WhatsApp dominates the mobile messaging market in the U.S., Brazil, South Africa, Indonesia and China, surpassing runner-up Facebook Messenger in those markets.
Facebook wanted to buy a true messaging app to complement Facebook Messenger, and WhatsApp was the obvious choice thanks to the simple utility and skyrocketing global popularity.
“Messenger evolved from Facebook chat which was more instant messaging, not SMS ... a lot of messages aren’t real-time. WhatsApp evolved from the model of replacing SMS,” Facebook CEO Mark Zuckerberg said on a conference call on Wednesday afternoon. “Those are two pretty big and different use cases and the world needs both.”
Own Your Phonebook, Own Your Social Life
The rise of mobile messaging platforms like WhatsApp, Snapchat and Kik suggests that consumers find it relatively easy to adopt new messaging services that fit their fancy, simply because it’s easy to connect to their friends via their phone's contact list and chat away.
Until now, no social network could be an all-purpose messaging service because no social network had an SMS replacement. Most social networks are purely social identity managers. As WhatsApp falls into the Facebook fold, though, you can bet that the preeminent social network hopes to build it into a messaging application that dominates its rivals.
But marketplace dominance does a disservice to users when one major company keeps snatching up its competitors. We don't know how WhatsApp's data will affect what Facebook wants to build next, but anytime you diminish competition you also diminish innovation, which is both bad for users and developers.
Lead image by Madeleine Weiss for ReadWrite