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WhatsApp was the 'missing link' in Facebook's business, say analysts

WhatsApp was the 'missing link' in Facebook's business, say analysts

Analysts have reacted warmly to Facebook's $19 billion move for instant messaging platform WhatsApp, with most dismissing the idea that the buyout is sign of a "bubble".

According to Ovum's principle consumer telecoms analyst Eden Zoller, WhatsApp represents an "immediate benefit" to Facebook, with the social platform adding another major player in the messaging sector to its team.

"WhatsApp is a player which is strong in both mature markets as well as emerging markets across Asia and the Middle East, which present a significant growth opportunity for Facebook," detailed Zoller.

"At the same time, Facebook is growing its mobile footprint with close to a billion monthly active mobile users. This makes innovation in mobile services and capabilities an imperative, either organically or by acquiring best in class applications like WhatsApp."

Happy talk

Zoller believes WhatsApp's database of users phone numbers may have been a key driver behind the deal, describing it as the "missing link for Facebook’s user information."

"The access to phone numbers now bridges the offline and online worlds of Facebook users," Zoller continued.

"WhatsApp will also enhance Facebook’s mobile strategy and make the service grow faster and be stickier with mobile first users. Facebook will in turn provide WhatsApp with the funds and resources it needs to develop the service and become an even stronger competitor in an increasingly over crowded messaging market."

Ovum estimates operator based messaging systems – such as SMS – are on the decline, and will fall to 7.6 trillion messages annually in 2015. Over-the-air messaging platforms, however, are on the rise, and will near 69 trillion messages this year.

"There are questions as to how Facebook will position WhatsApp and its own Facebook's own Messenger application in the longer term," Zoller concludes, suggesting the two messaging platforms may be merged under the WhatsApp brand.

"Facebook will need to develop WhatsApp but must ensure it does so in a way that does not compromise the appeal of the core service that has proved so popular with users.

"Under its own management, WhatsApp has made a point of staying true to its messaging roots and aimed to remain a pure play messaging service by avoiding broadening the platform to support additional services such as games."

No bubble

For Vanessa Barnett, technology & media partner at law firm Charles Russell, WhatsApp's acquisition is a "clear statement of intent on the part of Facebook", especially considering the "hefty" $19 billion price tag.

"What can we take from this? Well, we could sit here and talk of bubbles and the early 21st Century, or we could say 'hey, you know what, there's value in the technology sector and this is another sign of confidence'. I'll go with the latter," added Barnett.

"We are seeing a growing number of sophisticated, well funded businesses in the technology sector coming to us for advice - particularly those who are harnessing apps and internet technology for their business model.

"Global confidence in the sector bodes well for the UK. Watch out Silicon Valley."

 


With a fine eye for detail, Keith Andrew is fuelled by strong coffee, Kylie Minogue and the shapely curve of a san serif font.

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