Prantik Mazumdar
Feb 20, 2014

What Facebook's Whatsapp acquisition means for marketers

Potential scenarios for how Facebook will integrate new toy WhatApp into its offering, and what opportunities brands might get out of the blockbuster deal.

Prantik Mazumdar
Prantik Mazumdar

See also: Facebook buys WhatsApp: It's neither the medium nor the message, it’s the messaging

Facebook had been wooing WhatsApp for over two years now, and hence this deal does not come as a surprise, given how the exponential growth mobile messaging services like WhatsApp, WeChat, Line, Viber et.al have seen in the last 12 to 18 months. I think its a big, bold, strategic move by Facebook for a few specific reasons:

  • WhatsApp is the largest mobile message platform and has 450 million active users and is adding about 1 million users a day. In comparison to that, Facebook Messenger only stands at about 150 odd million active users and is not growing at the same pace as WhatsApp; hence it makes sense to inorganically join forces than fight a losing battle. What is amazing is not just the 450 million number but the rate of growth they have been experiencing - they hit the last 250 million active users in just 9 months. If this acceleration continues, I wouldnt be surprised if they hit the billion mark in the next 12-15 months. So the deal makes a lot of sense from the perspective of accessing a very large user base.
  • More importantly, acquiring WhatsApp gives them immediate access to a very large mobile messaging audience outside the US - especially in Europe and in Asia. In the mobile messaging space, WhatsApp is the market leader in pretty much all of Europe, Brazil, India, Australia, NZ & Canada and hence from a market access perspective, the deal was a no-brainer.
  • Its not just about the access to a high volume of global users but also the demographics of these users that are critical to this deal. There have been recent reports about how the teenagers are moving away from Facebook and are getting hooked to mobile messaging/chatting apps such as Snapchat, WhatsApp, LINE, Viber, Secret, Whisper et.al . If that is indeed true, this deal is a good hedge as it will help Facebook get closer to that younger audience that is always looking for novel ways to communicate. They tried acquiring SnapChat for US$3 billion but that deal fell through and although they ended up paying 6 times more, I think in the long run this deal would make more strategic & commercial sense.
  • To add to that, I think the two audience bases would complement each other and give consumers the opportunity to communicate with two sets of contacts (not necessarily mutually exclusive though) - Facebook Messenger allows to communicate with our Facebook Friends while WhatsApp gives us immediate access to people in our mobile contact list, who we may not be "friends" with on Facebook.
  • Ever since Facebook went public, there has been immense pressure on them to monetize on mobile; while they have managed to earn 53 per cent of their ad revenue (US$1.37 billion) through ads on its mobile app, the deal with WhatsApp opens up a new, lucrative revenue stream altogether. As Zuckerberg himself mentioned this morning, WhatsApp is on its way to add a billion active users and if they manage to successfully charge US$0.99 per year from every active user, that's nearly a billion dollars of additional revenue. And if WhatsApp chooses to work on new revenue models through stickers, doodles, in-app advertising etc similar to what WeChat, Viber and LINE have been doing, that would bring home few hundred millions of dollars additionally and potentially help justify the mammoth US$19 billion that Facebook has decided to pay.
  • Lastly, similar to the Instagram deal, what amazes me is the operational efficiency of a company like WhatsApp and I think that's what makes the deal sweeter. The company employs only 32 people and spent 0 dollars in marketing itself or acquiring users, which is a testimony to it being a very lean, profitable operation and that would serve Facebook well from a financial perspective.
  • On a lighter personal note, I am happy that while the Ukranians are fighting a grave political battle in Kiev as we speak, they have something to cheer about! He comes from a very humble, rural background from Ukraine and his entrepreneurial struggle will be an inspiration to many!

The key question remains whether Facebook would integrate WhatsApp with its current services and its implications for brands?

Potential implications for brands

In a recently published article, I outlined how businesses are leveraging WhatsApp for sales and client relationship management, customer service, project management and internal staff communication. I personally believe that as a stand-alone mobile app itself, WhatsApp has a lot of commercial relevance for companies and brands. Whilst the official press release quotes Zuckerberg saying that WhatsApp would run independently in the near future, here are few potential implications that brands can leverage should Facebook decide to integrate the two services:

  • If Facebook integrates its fan pages with WhatsApp or allows WhatsApp to open brand channels (similar to how Instagram allows brand pages), it would open a whole new, personalized, communication channel for brands to reach out to fans on their mobile devices, market their brands offerings, promos and even use it as a channel for customer service. 
  • When Facebook failed to acquire Snapchat, they came up with Poke, which offered similar ephemeral messaging services. If Facebook decides to integrate that feature into Whatsapp eventually, this could offer brands the opportunity to create immediacy by sharing offers, promo and branded content for a limited time span. Some brands are already experimenting with such campaigns on SnapChat and doing so on Facebook/WhatsApp would give them access to a much larger and broader demography
  • Whilst WhatsApp's co-founder, Jan Koum is known to be allergic to "ads, games and gimmicks", I believe it is only a matter of time before commercial pressure pushes them to offer these to brands and consumers and this would open up very interesting opportunities for brands to leverage upon. Going by the revenue models on WeChat, LINE and Viber, one can expect the following:
    • Brands would be able to run targeted ads to interact & engage with WhatsApp users -  this would be a great way to create personalized, location-based ads & offerings for target audiences. 
    • Brands would be able to create customized brand content through stickers, doodles, emojis etc. This implies that brands and their respective creative teams need to be prepared and geared up to create content in new formats and in quick time.
    • WhatsApp already has a feature for voice communication. If they do open this up to brands, this could be a fantastic opportunity for them to get celebrities/brand endorses to market their products and services through a voice blurb - something similar to what BubbleMotion offers in emerging markets today via premium SMS/IVR.
    • Facebook has not been successful in allowing its tabs and contest apps to run on mobile devices. If they decide to integrate apps, contests & games via a WhatsApp integration, they would be able to create a far more personalized experience for customers. Brands could leverage on this to create branded contests & games for its consumers and/or use in-game product placement to create subliminal engagement.
    • Brands should also prepare themselves to use WhatsApp as an effective crowdsourcing platform to get ideas for new products, services, brand names, solutions to research problems, customer referrals, personalized recommendations for new hires etc. 
    • Depending upon the depth of its integration, Facebook could offer m-commerce opportunities for brands to directly sell to customers via WhatsApp. Brands could sell independently as they do on Twitter or they could tie up with telcos to piggy back on their delivery and billing services.
    • Lastly as a marketer what I would be most excited about its the potential for brands to access & harness the data analytics that WhatsApp would be able to provide - the juxtaposition of data about mobile app usage, contact data, location data, peer-to-peer interaction could be very lucrative to mine.

If done well, the Facebook-Whatsapp relationship could provide a classic SoLoMo offering to brands—finally!

Prantik Mazumdar is a partner at HappyMarketer, where he leads the social media, mobile and display advertising practice.

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