Facebook stock fell 5 percent Wednesday night in after-hours trading and continued to fall Thursday morning. As of writing, Facebook has just recovered to where it opened Thursday morning.
The stock performance has led Internet commentators to criticize Facebook’s purchase and declare that there is no way WhatsApp is worth that much money. Which probably shouldn’t come as a surprise: People said the same thing when Facebook acquired Instagram.
No one can guarantee whether or not the purchase will work out for Facebook, but a look at some of WhatsApp user data suggests that the acquisition wasn’t just a smart move for Facebook, it was a good deal. Here’s a look at six reasons why Facebook purchased WhatsApp.
1. WhatsApp User Growth Is Ridiculous
2. WhatsApp User Engagement Is Equally Ridiculous
Not only does WhatsApp have a ton of monthly users for such a small company, 70 percent (315 million) of those people use WhatsApp every single day. For comparison, only about 62 percent of monthly users visit Facebook every day. Twitter didn’t reveal daily active users in its first earnings report, but only 241 million people are monthly Twitter users, and growth is slowing dramatically. These users send 600 million photos every day, more than the amount users upload to Facebook.
3. Facebook Acquisition Is Defensive
WhatsApp growth is so impressive, Facebook’s acquisition also has a defensive element to it. Facebook faced questions and concerns from investors after data revealed young users abandoning Facebook in favor of messaging apps like WhatsApp and SnapChat (which Facebook also tried to purchase). Rather than be threatened by WhatsApp becoming “the next Facebook,” Facebook just brought WhatsApp into the fold.
4. WhatsApp Is Young And International
While WhatsApp hasn’t particularly caught on in the U.S., it is one of the most popular mobile apps in Europe, India and Latin America -- areas where Facebook is committing resources to expand. As mentioned above, WhatsApp will also help Facebook attract and hold on to younger people that simply don’t find Facebook to be cool anymore.
5. WhatsApp Is Already Monetized
When Facebook purchased Instagram, the social network had to craft a business model for the photo-sharing app. WhatsApp, however, already charges every user $1 after using the app for a year. If WhatsApp can keep attracting a million new users every day, the potential for new revenue for Facebook is astronomical.
6. That Revenue Can Easily Become Profit
One of the problems Twitter has faced in turning its growing revenues into an actual profit is the fact that its expenses continue to expand. Twitter has a massive staff and has spent a lot of money on expanding its business. WhatsApp, on the other hand, has a staff of only 55 employees and keeps costs very low. WhatsApp, and by extension Facebook, should have no problem turning growing revenues into a larger profit.
Do you think Facebook’s purchase of WhatsApp was a smart move? Let us know in the comments.
Originally from Northern California, Ryan W. Neal came to New York to earn his master's in journalism from Columbia University. He joined IB Times April 2013, and is a writer...