The Acquisition of Whatsapp by Facebook - Case Study Example

Business Report Name of Student: Name of Course: Name of Instructor: Name of Institution: Business Report 1.0 Introduction A college student, Mark Zuckerberg, developed Facebook in the year 2004. He created it with his friends with the aim of keeping in touch with his friends once they cleared college. Its popularity grew and extended to other universities around, such as Stanford University, Ivy League and several colleges in Boston (Vander Veer 2010, p.113). The current worth of Facebook is about 150 million dollars with its shares going for 61 dollars per share. Its popularity increased after Facebook purchased a celebrated application of sharing photographs, Instagram, for around one billion. Facebook is a company based in America with about 1.23 billion users in the whole world. It allows members to create their personal profiles detailing their background, upload their photos, videos and articles for purposes of maintaining contact with their friends (Mcfedries 2011, pp. 3-11). WhatsApp Messenger provides a platform for sending messages to friends without the necessity of paying for the SMS. The application uses an internet data plan used for emailing, and there are no costs involved. The first year of subscribing for the service is free, but one is required to pay a standard fee of 0.99 dollars each subsequent year. The WhatsApp Messenger allows users create groups and exchange unlimited texts, images, audio and video media messages. The application is popular, with around 450 million users. Only Android, iPhone, windows and Blackberry phones can access the application. Facebook Inc. acquired WhatsApp Inc. in 2014 for 19 billion dollars. The method of payment was 4 billion in cash, 12 billion to be paid with shares in Facebook and 3 billion in restricted units of stock to the founders and staff of WhatsApp. The transaction attracted a lot of interest as it was the largest procurement of a corporation supported by venture financiers. 2.0 Case Summary The average person uses applications in his smartphone mostly for messaging, uploading photos and playing games. Facebook has not been successful in creating a standalone application that will provide all these services. To cover up for this weakness, Facebook is prepared to purchase these applications. Its aim is to be the number one smartphone application that will perform in a multiple of ways, taking up various slots on the phone home screen, rather than just a single task. Facebook bought WhatsApp Inc. with a staggering figure. Many experts maintain that this amount was too much for a basic messaging company. Apple has a messaging system, iMessaging, operating on mobile phones. Blackberry also has Blackberry Messenger, a service that is very popular among people that own Blackberry smartphones. All these messaging services, however, cannot provide Facebook with about 500 million users, numbers that Facebook Inc. can include to its members. Facebook acquired a messaging network that has a lot of promise. It grows at a high rate, superseding itself, and with almost half of the members that Facebook already has. It is a good deal. WhatsApp Messenger had a lot of competition, with other companies eyeing it, Facebook had to offer an extremely attractive deal. The report will investigate this acquisition in detail using a SWOT analysis. It analyses the strengths, weaknesses, opportunities involved and the imminent threats. The aim will be to establish whether this acquisition as worth it, considering the high price involved. It aims to establish whether the critiques of experts are solid, or it’s just the shock of such a high amount being placed on a typically simple messaging application. 3.0 The Swot Analysis The analysis is a scan of the overall business with the aim of conducting a thorough research of the internal and external factors relating to the business. The internal factors involve the strengths and weaknesses of the business while the external factors relate to the opportunities and threats involved in the business. It is important in matching up the resources and capabilities of the firm in a competitive environment in which it operates. 3.1 Strengths The acquisition of WhatsApp Inc. by Facebook Inc. benefited Facebook in several ways. A major plus to this acquisition was that Facebook gained the ability to access 450 billion new users. According to a response by Mark Zuckerberg, the acquisition was a good deal because almost half billion users are already loving using the application. The combination of Facebook, Instagram and now WhatsApp will bring Facebook around 2 billion users who are active. Despite WhatsApp having reported low revenues in the recent past, its strategic value and business potential will make its worth immensely increase, especially with its current association with Facebook. Facebook has increased its competitive edge over other rivals through the acquisition of WhatsApp. The acquired company brings new ideas and structures to Facebook. It has the potential of being excessively successful, and also introduces a new messaging culture to Facebook. WhatsApp gained is edge by not being similar to other messaging competitors, by not having an existing ecosystem. The messenger has the reputation of being lean and uncluttered by unnecessary information gathered by its system. All that is needed to access WhatsApp is the phone number and acceptance to the terms of service. It has succeeded where multi-media messaging terribly failed. Facebook was targeting at gaining the popularity and zeal that WhatsApp has. With little revenue being gained, WhatsApp managed to stay ahead of its competitors and avail the best service to its users who are ever increasing. According to Mr. Zuckerberg, it’s so rare to find a service that is accessed by a billion people with so little revenue being gained. The acceptance that WhatsApp messenger has is because it is very simple in its service and operation, yet so strict in the same breath. It allows no gimmicks nor advertisements in its service. It is a simple yet precise messenger. 3.2 Weaknesses The price at which Facebook gained WhatsApp was widely debated across the globe. Many people viewed it as too much, even for a widely known messaging Application. Facebook was considered to be desperate, and this is a serious charge that can pose a threat to the success of the hyped company that has lasted for ten years. Facebook is viewed to be old and the edge it posed when its establishment is now gone. To the young generation, it’s phased out; while the older generation view it as unengaging. It is hard to maintain the interest of users who have joined a group. After introduction of the topic, many people contribute to it but within a short time the interest faze out. Similarly, Facebook has huge security concerns (Lüsted 2011, pp. 50-70). There was a report that passwords of Facebook users are subject to hacking. The identity of the Facebook users is at a constant threat of being stolen. People also have the tendency of creating fake profiles in Facebook. Stalkers and marketers are mostly the culprits of this. WhatsApp do not possess the loyalty of its customers. They can waltz out of the service of WhatsApp to another messaging app offering a better deal. The acquired messaging application has observed sharp declines in its share of downloads, a fact that illustrates that the application is not safe in maintaining its superiority over other credible applications such as Snap share that was the earlier target of Facebook. The acquisition has the weakness that both internet companies have major weaknesses that threaten their existence. If viewed that the acquisition by Facebook was an act of weakness, competitors might swoop in and dominate the market. 3.3 Opportunities WhatsApp Messenger offers Facebook an opportunity to maintain its glory as the number one networking site. The new users it avails to Facebook is a good start. The structure in which WhatsApp operates will enable Facebook achieve its principle goal of reaching out to as many people as possible. The messaging application only requires the phone number of the users. People using this application feel safer since it’s rare for a breach to their privacy to occur. WhatsApp involves users who know each other on a personal level, unlike Facebook. The people who contact each other through WhatsApp share phone numbers. They, therefore, know each other. If Facebook chats can use the same strategy or incorporate WhatsApp in its service, then people can connect at a higher level. The main aim of Facebook is to connect people around the world (Eisenlauer 2013). With WhatsApp on its radar, Facebook has a chance to attract a younger population, especially teenagers, who have grown impartial in Facebook. Teenagers are the most important factor in any social network because they dedicate the most time in accessing the site. The teenager demography in WhatsApp will extend to Facebook with time and also, through WhatsApp messenger, they will start using Facebook again. The number of accounts closed will eventually reduce. Facebook has bought for itself a way in which it can penetrate into the mobile messaging service. The operation will enable Facebook to be involved in various applications in the smartphone. Majority of people are addicted ti texting and WhatsApp allows people to chat in an unlimited manner at almost no cost. Facebook will be adopting this niche. Although Facebook owns Facebook Messenger (Slade, Givens-Carroll and Narro 2011, p. 170), it has been unable to reach the heights of WhatsApp. The acquisition enables Facebook acquire data on millions of users, and gain invaluable knowledge on the patterns of mobile use and mobile customers. This information is applicable in all kinds of contexts, and Facebook can tap into that understanding. The Facebook messenger is different from WhatsApp because WhatsApp communicates in real time, unlike the messenger. Facebook can use both and create a bigger and better application. It is a fact that Facebook is old, and it has relished in its glory days. It, however, does not possess the vibrancy it had seven years ago. The major achievement of Facebook is acquiring and maintaining an excess of 1.2 billion monthly users who are active. It has, however, been a challenge for Facebook to acquire a billion more users. These new users will probably emanate from developing countries. WhatsApp is thriving in this developing countries. That is a major opportunity for Facebook. Through WhatsApp, Facebook has a prospect of growing, especially in Asia and across the Middle East. Facebook was attracted by WhatsApp because of the strength of WhatsApp in emerging markets. It is an opportunity for Facebook to diversify and extend past the social network. 3.4 Threats Facebook involves itself with a lot of advertising (Thompson 2012, pp. 129-142). It is almost annoying because almost every move in Facebook will lead one to a Newsfeed. WhatsApp, on the other hand, is totally against advertising. Keeping things simple is their rule. The advertisement fact is considered a big incompatibility between the two countries. There is an expectation that Facebook will incorporate advertising into WhatsApp, and this will ruin the application because its users especially love it for its simple nature. The threat of Facebook changing WhatsApp makes most current users skeptical about the acquisition. The Facebook Company has an insatiable appetite for information. It can partially fill this thirst with the data available to Facebook after it has acquired the information on users in WhatsApp. The biggest threat in this scenario is on the users. What will Facebook do with all of this information? If online retailers will have access to this information, then there are serious threats to the privacy of the acquired users. 4.0 Conclusion According to the above SWOT analysis conducted on the acquisition of WhatsApp Inc. by Facebook, the deal was a worthwhile one. The strengths and weaknesses of the contract weigh more than the weaknesses and threats involved. Facebook has a better chance of evolving and maintaining its dominant position in the social network. WhatsApp also has the opportunity of maintaining its popularity, with the more experienced base of Facebook placed at its disposal. The two companies can forge their capabilities and emerge a formidable force in the networking world. References Eisenlauer, V. (2013). A critical hypertext analysis of social media: the true colours of Facebook. Lüsted, M. A. (2011). Social networking: MySpace, Facebook, & Twitter. Edina, Minn, ABDO Pub. Co. Mcfedries, P. (2011). The Facebook guide for people over 50. Indianapolis, Ind, Wiley. Slade, a., Givens-carroll, d., & Narro, A. J. (2011). Mediated images of the South: the portrayal of Dixie in popular culture. Lanham, Md, Lexington Books. Thompson, D. (2012). Pop-up business for dummies. Chichester, Wiley. Vander veer, E. A. (2010). Facebook the missing manual. Sebastopol, CA, O'Reilly. Read More