By now, you have heard about Facebook’s whopping $19 billion acquisition of WhatsApp. The media has widely reported the newly-accepted business proposal, largely account of its monumental price tag. The deal provides WhatsApp’s founders with $4 billion in cash, $12 billion in Facebook stocks, and $3 billion in restricted shares.
The hefty payout, according to Facebook CEO Mark Zuckerberg, is justifiable in light of WhatsApp’s 450 million users, many of which reside in emerging markets. Behind the scenes of this massive business proposal, though, it is easy to see that the buyout is all about data – user data and data streams, which are often pricey in emerging markets. WhatsApp is light on its feet – lighter than the notoriously crummy Facebook mobile app, in fact.
So, friends, here is an opinionated take on the Facebook/WhatsApp buyout, and what us entrepreneurial types can learn from the transaction.
Steve Ballmer doubts it is a good idea
Chances are, if you are doing something right, former Microsoft CEO Steve Ballmer will think it is a bad idea. Now, he might come around in a few years (when it is too late) and declare that it was a good idea the whole time, but in the meantime, you can rest assured that the WhatsApp buyout is a good idea, because Ballmer doubts it.
Of course, considering Ballmer is worth more than the Facebook/WhatsApp buyout, you cannot discredit his opinions outright.
Speaking at Oxford University, Ballmer had this to say about the Facebook/WhatsApp deal:
“Is it a fad? Well, probably not. I don’t know if it will be successful or not. Will those 450 million people ever generate enough revenue? Mark Zuckerberg believes so and I have no reason to doubt.”
“But you really have to look at things and say ‘What is the measure of success.’ In the long run the measure of success is ‘Do I make a lot of money for my shareholders?’” - (CNBC reports)
While it is fun to joke about such a suggestion from Ballmer (who oversaw sharp drops in Microsoft’s stock value during his stint at the company’s helm), he raises an interesting point, nonetheless.
Ballmer’s point about stockholders tells us everything. In recent times, Facebook has experienced an alarming decline in younger users – formerly a key demographic for the social media giant. As users have flocked to lighter platforms (and less data-hungry ones) like WhatsApp, Snapchat, and Tumblr, Facebook has foundered a bit. The bold acquisition of WhatsApp gives Facebook investors’ confidence, proving it to be worth its astronomical price tag, perhaps.
Is the Facebook/WhatsApp buyout putting users first?
With the words, “Do I make a lot of money for my shareholders?” Ballmer exposes not only his own weaknesses in the past decade at Microsoft (is the Surface good for anyone? How about Windows 8?), but also points to what the “flaw” in Zuckerberg’s latest business proposal might be.
Zuckerberg, it seems, like Ballmer before him, is not thinking “user-first.” He is (as always) thinking big numbers – hundreds of millions of users, loads of data, and (naturally) lots of money.
The question is, “Is that a sustainable way of thinking?” In light of the present evolution prevailing in consumer expectations, and the management revolution simultaneously underway, is it really all about “stockholders?”
As John Herr writes on The Accelerators, a major shift in how businesses approach design is going on, from end-to-end. In the posting, Herr states:
“Today’s entrepreneurs simply must take a holistic view of design and create an end-to-end customer experience that includes ease of acquisition and implementation, ease of use, product and customer support, ongoing customer engagement and brand identity. We are not talking about occasional focus groups and alpha-test cycles here. Rather, you have to keep your customers actively engaged, and use a steady stream of input from them to develop and evolve your products.”
Herr has really nailed the current economic climate down, and certain external indicators are showing how “the little guy” – the upstart entrepreneur – is getting this right, perhaps more than major players like Facebook.
That brings us to another bit of news. The U.S. Department of Labor has stated that jobless claims have dropped in recent times, presumably in light of the growing number of people picking up the self-employed, entrepreneurial mantle.
What is ahead for WhatsApp?
WhatsApp rose to prominence based on its light-on-its-feet simplicity, which allows users to skirt hefty data charges to send messages – which is quite valuable in areas where text messaging fees are costly. That certainly makes WhatsApp a textbook “user-centric” design, with hundreds of millions of users to show for it. Facebook, conversely, has never really been about the user. It has always been about the data, or better yet, the value of the data.
As part of the new business proposal, WhatsApp, like Instagram, will function autonomously within Facebook’s organizational structure, but we are wondering, “What will Zuckerberg and Co. do to change it?” Will there be ads to drag it down? Doubtful. Will user data be collected en masse, adding to Facebook’s stores of data new individuals from otherwise untapped markets? Most assuredly.
Even as Zuckerberg and WhatsApp CEO Jan Kuom shake hands over their still-hot business proposal, many onlookers are wondering if it will truly be an advantageous deal for the existing WhatsApp user base. The focus on users that made WhatsApp worth $19 billion may take a backseat to Zuckerberg’s data mining agenda, and that could spell more trouble ahead for Facebook, in the end.
The buyout almost seems too big to avoid a devastating disruption, perhaps from one of “the little guys” out there who are more readily embracing the user-first approach that is fast becoming the new norm.
Author’s Note: That is my take on it. It is by no means conclusive. What do you think about the WhatsApp buyout? What do you think it will mean for users? Panda Pals, we would love to hear from you in the comment space below.