Analysis of Facebook’s Acquisition of WhatsApp

Introduction
As technology has evolved, people have shifted towards the more convenient mobile phone.
This can clearly be seen in the upwards trend of the mobile phone capturing the market share
previously dominated by the desktop.
Year Mobile(%) Desktop(%)
2009 1.28 98.72
2013 22.18 72.55
2014 31.82 61.68
Sept 2019-2020 50.21 47.17
As seen clearly from the years of 2009 to 2013 before acquisition, the growth of mobile users
has been significant and showed a need for tech companies to develop a strong foundation in
this sphere. Facebook had noticed this trend quite early on with its acquisition of Instagram in
2012 and wanted to stay competitive in the sphere amongst other giants like Google, so
Facebook set its’ sights on the latest app to take the mobile space by storm.
About WhatsApp
WhatsApp was founded in the year 2009 and rapidly grew to have around 450 million active
users by 2013. As per the data, WhatsApp had around 70% of its active users as compared to
Facebook which has only 60% of active users.
WhatsApp’s main intention was to follow a low-cost business model, that is, to increase the
number of users but not to make profits as they had initially charged only 1 dollar for their
services.
WhatsApp has many features like private and group chat options which gave a better
platform for users to use it more conveniently with better privacy options. This increased
better connectivity between people through mobile communication. For this reason,
WhatsApp has an excellent reputation for its user-friendly nature and convenience to use in
areas with poor connection as well. It then went on to dominate amongst messaging apps
such as WeChat, Snapchat etc.
Acquisition Process
Onavo was a public based data analytics app, through which data such as bandwidth usage
per app and web traffic of mobile user could be tracked. This app was acquired by Facebook
on October 2013. The app was made private by Facebook and used by them glean in on the
market potential that WhatsApp had to offer. This posed a threat to various tech giants like
Google and this information allowed Facebook to have an edge over its competition in
acquiring WhatsApp. Facebook successfully acquired WhatsApp in the year 2014 for 19
billion dollars.
Reasons as to why the purchase was a smart decision
A lot of people were very sceptical about the high value purchase of WhatsApp since it did
not run on a profit-based model. However, comparatively mobile based messaging apps take
up almost all the average mobile users’ screen time. Also seeing how messaging apps like
KakaoTalk and Weibo were becoming a one stop for all types of services such as online
payment, the acquisition allowed Facebook to snatch potential future market space from
competitors like Google and helped maintain its’ relevancy in the market.
This was proven almost immediately as Facebooks’ stocks rose from 68 to 77.56 dollars
immediately after purchase. Also, as of 2019, Facebook had 2.13 billion users and WhatsApp
had 1.5 billion monthly active users with a growth of 2 percent per year.
Conclusion
As showcased by Facebook, acquisition can be a powerful tool in strategic management, it
has been able to keep a strong hold on the mobile market share very effectively through its
purchases of Instagram and more notably WhatsApp. Due to initiatives like WhatsApp
Business, adding of different features and QOL adjustments it has been able to create new
revenue streams for itself and take over a large segment of the ever growing digital and
communication space. While people were unsure of the decision made by Zuckerberg at the
time, it is undeniable that the purchase was very effective in the growth of Facebook as a
company allowing both to mutually grow into powerhouses in the international technology
domain.

Submitted By(Group 2)
201202007 Seema Pradhan
201202008 Melisha Dsouza
201202009 G Shaila Prabhu
201202010 Chrisal Ashwitha Pereira
201202011 Akshay Bhat
201202075 Saif Saeed Khan
201202076 Sathvik
201202077 Vyshnav K.P
201202078 Reuben Mathew
201202079 Sona S Suvarna