Facebook acquires WhatsApp, is this a declaration of War?


Facebook_vs_Whatsapp

Last week everyone was surprised to hear that Facebook acquired the Mountain View based startup WhatsApp, for a total of $19B. The industry was stunned by the amount of money involved, making this the largest Silicon Valley acquisition of recent years. Looks like Facebook made this move in order to leverage the almost half a billion user base of WhatsApp and protect it’s own user base from becoming stagnant.

However, I believe that – among other reasons – Facebook decided to acquire the popular instant messaging service in order to make a statement. This statement has two targets, first the mobile network operators (MNOs), such as AT&T, Verizon and T-Mobile in the US:

“We will work with you, but you will serve as our agnostic data carriers.”

Second, the rest of the technology sector major players such as Google, Apple and Microsoft:

“There can be only one winner in the Internet communication game and that will be Facebook.”

Over-the-top content (OTT) services such as WhatsApp, YouTube, Netflix, Spotify are the biggest drivers of Internet traffic; traffic also distributed over the airwaves controlled by MNOs. By OTT content we refer to video, audio and other media (instant messages) delivered over the Internet without a network operator (MNO or ISP) being involved. While MNOs facilitate such services by providing cellular data connections, at the same time they lose revenue and insight over their subscribers’ behavior.

For subscribers the case is simple; why pay premium rates to make a video call or send a photo to your friends and family when you can use Skype or Viber and only pay for the data usage (or nothing if you are on Wi-Fi)? Not to mention the sky-high roaming charges you can avoid if you need to communicate across countries. OTT services have drained away huge revenues from MNOs with solutions such as instant messaging and made them wary of them.

It is no coincidence that almost all the major technology companies are in one way or another involved in instant messaging, voice and video calling. Apple with iMessage and Facetime, Google with Hangouts, Microsoft with Skype, even BlackBerry with the BB Messenger.

The acquisition of WhatsApp, it’s instant messaging platform and the newly announced voice functionality will allow Facebook to extend and improve the existing communication options for it’s user base. Users, while using such services, will become more dependant and attached to the platform. They will generate more and more data, which will be collected by Facebook and utilized for targeted advertising and personalized recommendations, operations that are tied to revenue generation. That is also the reason why Facebook is more than willing to offer these services for free, a model followed by it’s competitors too.

Some people will claim that Facebook and the other Internet companies are an ally of MNOs because they drive cellular data consumptions like the rest of the OTT content services. This is true, but all these services are based on network provider agnostic communication platforms. This means that they can function over the existing MNO (or ISP) platform and do not share the user information with them. MNOs have failed to understand this new world and are making sporadic moves in an effort to keep up.

Do not be fooled, Internet companies will not come forward and challenge MNOs directly but will try to appease them by offering collaboration. This game is more complicated and based on revenues as most things are in the business world. Facebook will try to maintain a friendly relationship with MNOs in order to be allowed to tap the MNOs’ database of user information and usage habits. The one who controls the most usage data that are linked to real people will eventually manage to earn the highest advertising dollars.

To conclude, Facebook Messenger has not been the overnight success that Facebook was hoping for, so now they have decided to buy a proven app with a real database of users. The question is, will people continue to use Whats App, which is known for discretion and security now that it’s in the hands of a company that will almost certainly change these features in order to tap into the big data underneath. More interesting though will be the next move by the other players in the field and by the MNOs.

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