Is Facebook’s Acquisition Strategy the Right Approach?

20 Feb

In recent years, Facebook has been in an aggressive acquisition mode. The most famous acquisition — until today — was Instagram in 2012 for $1 billion.

Now, Facebook has announced a bid for messaging company WhatsApp for $19 billion. Does this bid make sense. Take a look at this Wall Street Journal chart.

Source: Rani Molla/Wall Street Journal

 

Consider these observations, as reported by Reed Albergotti, Doug MacMillan, and George Stahl for the Wall Street Journal:

“‘While monetization will take time, we think the potential size of the user base and strong engagement on WhatsApp should ultimately lead to meaningful monetization,’ Sterne Agee analyst Arvind Bhatia said, adding that 70% of WhatsApp’s users use it daily, above Facebook’s 62%. ‘We note that WhatsApp’s user base is nearly 2x Twitter and growing at a significantly faster pace,’ the analyst said.”

“WhatsApp has long been seen as a takeover target for Internet giants. Google had reached out to buy the company several years ago, two people familiar with the situation said, while two other people said deal talks between the two companies also took place recently. A Google spokesman declined to comment. While Facebook’s shares fell Thursday, the decline would have been worse if Google had purchased WhatsApp.”

 Click on the image for a WSJ video.


 

9 Responses to “Is Facebook’s Acquisition Strategy the Right Approach?”

  1. carky February 20, 2014 at 11:50 pm #

    If you like monopolies, you,ve gotta love this one

  2. Rachel Trotta February 21, 2014 at 1:18 pm #

    I would say it is an interesting acquisition but truly it is not. Facebook’s acquisition history is all in the realm of what they do. I believe they have an understanding that nothing is forever ESPECIALLY in the tech-app-social media industry and their acquiring of different yet similar companies is very smart. As for the actual acquisition price I cannot speak on its appropriateness but its popularity seems to be growing and all this media attention will probably only grow it even more! I do wonder why Google did not acquire the app originally, also I wonder if the 19 billion will be split among the measly 55 employees….

  3. Nina Rossiello February 22, 2014 at 11:41 pm #

    Facebook seems to be taking over the social media world. When they purchased Instagram back in 2012, people went bananas. If people aren’t happy with how Facebook is changing they sure aren’t going to be excited when all their favorite apps are owned by Facebook and change constantly too. Facebook is slowly monopolizing (well trying to anyway) social media whether society likes it or not…no pun intended :P

  4. theroyalbengalitiger February 23, 2014 at 1:33 pm #

    I think that Facebook is trying to leverage its market position in a way that it can soon be a full service provider of social media content.

    As Reed Albergotti (from the WSJ video) mentions, WhatsApp has replaced text messaging overseas and has an amazing growth rate and 70% of its users use it regularly. Facebook is obviously assuming that mobile messaging will be an important part of business strategy in the future and therefore only time will tell if they made the right decision with spending so much money on buying up-and-coming social media platforms like Instagram and WhatsApp.

  5. sydneyruggieri February 23, 2014 at 9:53 pm #

    I think that this acquisition does not make sense and that What’sApp is being way overrated and overvalued. Although the statistics seem to suggest high popularity, beating facebook, I do not think that necessarily means that its downloads will continue to increase. On a personal note, I know that most people I know do not have What’sApp and have so far no intention of ever obtaining it for the main reason that it is no different than any other messaging app, including the normal mode of text messaging that comes with the phone. There is no real niche as far as I can tell that would make me want to continue jamming my device full with one similar and unnecessary application after the other.

  6. Abhishek Jha March 1, 2014 at 11:44 pm #

    Facebook is just trying to make sure that there’s not much competition in the social media arena. Technology is ever changing, and social media even more so. Facebook can’t constantly keep coming up with the next big thing, so it does the next best thing, buy out any novel social media company that crops up. It doesn’t want to be the next myspace. As long as it has all the best apps and utilities under its belt, Facebook will continue to survive, which is the first priority of a business. It will figure out ways to monetize these services sooner or later.

  7. HuDie-MKT249 March 4, 2014 at 2:02 pm #

    Whatsapp is very similar with the message smartphone app of WebChat, which is very popular among Chinese people. I would say 90% of WebChat’s users use it everyday!.I think this is the tendency that phone would be more and more often used than PC stuff. And sending message is the never fading way that people like to connect and communicate with others.

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  1. Is Facebook's Acquistion Strategy the Right App... - February 20, 2014

    […] In recent years, Facebook has been in an aggressive acquisition mode. The most famous acquisition — until today — was Instagram in 2012 for $1 billion. Now, Facebook has announced a bid for messa…  […]

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