What makes a $0.99 app worth $21.8 billion? It is the popularity and demand among consumers. Many years ago, BlackBerry was at the top of the cellphone market. Their unique feature was BlackBerry Messenger (BBM). BBM allowed BlackBerry users to instant message each other without the long waits between text messages. This feature was very popular among consumers. Unfortunately, it wasn’t available to other smartphone users. WhatsApp identified a gap in the market and created a platform that allows instant messaging between all smartphone users. Recently, they have extended features to include group chats and the ability to voice call contacts. WhatsApp used a focus differentiation strategy in order to fulfill a consumer need. As the popularity of the app grew, so did the evaluation of the company. Facebook felt the need to acquire the innovative app because of the access to the extensive consumer market that WhatsApp has secured over the years. The acquisition was not solely based on profits. Because Facebook has gone public, the acquisition of WhatsApp will also entice possible investors to invest into the company. Therefore, the stock of Facebook will increase as a direct result of the success that WhatsApp has attained over the years. With that being said, Facebook isn’t the only beneficiary of the deal. $2.8 billion in exchange for the ownership of an app sounds like a great deal to me.
Sources:
AP, “Facebook acquisition of WhatsApp a done deal,” The Vancouver Sun, Oct. 6th/14