The sale of WhatsApp to Facebook has shown the enormous potential of messaging apps, but the app still faces stiff competition in Asia.
Facebook announced today it would buy the popular mobile messaging app for $19 billion in cash and stock in the biggest tech acquisition since the Time Warner/AOL merger in 2001.
Unlike that deal between the tech and media giants, however, WhatsApp is a five year-old company with just 55 employees.
The app, which allows users to swap text, photos and voice messages, has grown exponentially, climbing to 450 million monthly active users (MAUs) in the five years since its launch in 2009.
“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” said Facebook CEO Mark Zuckerberg, in a statement from the company.
The deal will help Facebook re-engage teens who have been spurning the mainstream social networks, and who prefer WhatsApp and rivals such as LINE and WeChat.
At $19 billion, the deal is larger than the market capitalisation of many established, profitable companies, including Alcoa ($12.2bn), News Corporation ($10.27bn), and even Japan’s Kirin Holdings ($15.25bn) – which owns the Heineken and Monster energy drink labels.
Joining the social networking giant (cofounder and CEO Jan Koum will join Facebook’s Board of Directors) positions WhatsApp to benefit from Facebook’s extraordinary growth in Asia.
California-based WhatsApp – which does not collect personal information like your name, gender, address, or age, and deletes messages from its servers once read – may be appealing to Chinese wary of the communist party’s surveillance common on local sites like Weibo.
WhatsApp already dominates in markets such as Europe and India. But while it tries to muscle in on the East, it faces increasing competition in the West, with rivals LINE and WeChat beginning to claim more of the European market.
China-based WeChat (with 272 million MAUs) and Japan-based LINE (with an estimated 210-240 million MAUs) have invested heavily in marketing to push beyond their Asian strongholds.
In Spain, LINE has signed a partnership with Real Madrid and FC Barcelona, and already boasts 15 million registered users. Not to be outdone, Tencent’s WeChat has signed a number of celebrities who users can follow and interact with, including footballer Lionel Messi, basketballer LeBron James and Bollywood actress Parineeti Chopra. As of the end of 2013, WeChat has more than 100 million registered users outside of China and is growing fast.
It’s difficult to gauge LINE’s level of user engagement as it doesn’t release MAU figures, but the app’s rate of growth appears to be mirroring that of WhatsApp. From its launch beginning in 2011 LINE has accelerated exponentially, reaching 300 million users in November and is expecting to reach 500 million in 2014.
WhatsApp, which does not run ads, currently earns revenue through a $0.99/year subscription. In contrast, its rivals WeChat, LINE and Korea’s KakaoTalk have become platforms for games, third-party apps and digital “stickers” or emojis.
WeChat allows its users to book taxis and top up phone credit while LINE recently launched flash sales through its app in Thailand, with more than five million users signing up to buy L’Oreal lipsticks and other products.
Sticker sets, which are offered for around $1.99 and adapted for local cultures – Ramadan-themed stickers for Indonesia, for example – are earning LINE a cool $10m a month.
For its part, Whatsapp is not expected to complicate its simple app any time soon.
“Here’s what will change for you, our users: nothing,” co-founder and CEO Jan Koum wrote on the company’s blog after the deal news broke.