Sunday, June 13, 2021
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What prompted Facebook to buy WhatsApp?

Facebook which was struggling to enter the mobile messaging space has made the right decision to redeem itself by buying WhatApp for $19 billion. The landmark deal is one of the biggest in the history of social networking sites. Facebook which had succeeded in creating the biggest social networking platform was being addressed as a desktop based company. After the advent of smartphones and easy availability of data plans people started opting for mobile messaging services through their phones. It is being predicted that in future most of the people will access social networking sites through mobiles instead of desktops. Facebook was being criticised for its inability to design a profitable social mobile application. Three years back the social networking giant introduced the Facebook messenger service which was embedded with the mobiles but it failed to click with the users. Last year, the Facebook made an unsuccessful $3bn bid for SnapChat, a service that sends messages that erase themselves after a short period. The social networking site was being criticised by stakeholders for its inability to evolve with changing times.

It also tried to emulate twitter by introducing the trending feature and attempted to compete with Google by starting the graph search and email services. However, these initiatives failed to yield results as Facebook will be shutting down the email service due to poor user response. On the other hand, WhatsApp a newly found service established in the year 2009 has been growing at a faster pace and is adding around one million new users a day. The overall users of WhatsApp have increased to 450 million while Facebook has around 950 million active users. The valuation of a company rises on the growth rate achieved by it. Recently, it was reported that Facebook had lost some portion of its active users. Teenagers have been abandoning the social network to join the newer mobile messaging applications which are faster and offered better privacy options. On the other hand, many people have been abandoning Facebook due to the presence of large number of friends and irritating status updates. On the other hand, WhatsApp is clutter free and is fast.

Questions were being raised about the future of Facebook and how the company would survive in a rapidly changing world. There were two options for the social networking site either it could create its own mobile application or buy a popular social application. Facebook opted for the second option by purchasing WhatsApp for a whopping sum. Often it has been seen that big companies try to kill smaller firms by acquiring them as the latter poses a threat to their growth. Companies like Google and Facebook has been adopting this strategy to remain competitive in the online space. In the year 2012, Facebook had acquired the photo sharing site Instagram which too was becoming immensely popular.

By acquiring WhatsApp, Facebook has proved that it wants to be the leader in the mobile messaging space too. In future, the company could earn revenue by monetising the messaging service. Thus one can say that Facebook had panicked after the emergence of WhatsApp and insecurity led the social media giant to acquire a faster growing mobile application service. The application doesn’t have a proper revenue model but its impressive growth rate definitely made it a good buyout option for Facebook. Even though Facebook might have purchased WhatsApp but the company should focus on innovation and introduce new products instead of looking for inorganic growth through acquisition.

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