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Facebook buying WhatsApp for $19B. What does that mean to you?

The big news for today is Facebook buying Whatsapp for USD 19 billion. Considering Whatsapp only employs 50 people, that is a HUGE amount of money and a ‘little’ over the top. And another reason to rejoice for Whatsapp CEO Brian Acton, 4 years back when he was looking for a job, Facebook rejected him. That prompted him to create Whatsapp. And now he is selling the same product to Facebook for such a huge amount of money! A very costly mistake for Facebook!

But what does all this mean for us, as Whatsapp users?

Whatsapp co-founder Jan Koum specifically mentioned on the Whatsapp blog that they will not let advertising disrupt the user experience of Whatsapp. The deal would not have happened if they had to compromise on their core principles. This is particularly interesting considering that Facebook’s primary method of monetization is infact advertising.

Sequoia, a Whatsapp investor, also mentioned some interesting notes on their blog. Sequoia’s Jim Goetz says Koum is all for communication which is not bugged or taped and he kept this principle in mind when he started working on Whatsapp. Brian also had a similar focus of no ads, games or gimmicks apart from an app that simply lets you communicate with others when he thought of Whatsapp.

So without any tapping of messages or ads, how will Facebook justify such a huge valuation? And how do they plan to make their money back?

There are many blog posts which talk about why Facebook was interested in buying Whatsapp. Sequoia’s blog about the acquisition does that very well.

No doubt one of the reasons why Facebook acquired Whatsapp is the user base. Whatsapp currently has 450 million active users. And while some may argue that it is no direct competition, it definitely was a competition for Facebook messenger.

While Whatsapp founders may be firm on not introducing any advertising in their own product, now that they will be a part of Facebook, there’s no stopping FB from using your messaging information for contextual advertising. Whatsapp’s policy has (till now) been that they keep minimal information required from users – no usernames, password. They even claim to delete the messages from their server once delivered to users. But it remains to be seen whether their concern about privacy will remain as is or they might eventually let Facebook use the information obtained from Whatsapp messages for ads – if not in the Whatsapp app, then probably Facebook itself. After all, Facebook does have our phone numbers!

We sure hope Whatsapp remains unaffected by this acquisition (fingers crossed) and the Current status is not changed to “Relationship status” any time soon 🙂

How do you think Facebook will use Whatsapp to their advantage? Let us know through your comments.

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Anurag

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