- Posted February 21, 2014 by
This iReport is part of an assignment:
Why did facebook buy whatsapp??
Why did facebook buy whatsapp??
With a bold move facebook founder Mark Zuckerberg stunned the silicon valley with his historical acquisition of whatsapp, a cross-platform Instant Messaging app. This fetched its founders and its investment firm sequoia a whooping sum of $19 billion.
Mark Zuckerberg in his Investor Relations call praises the App growth in past years and substantiated his move telling this accelerates facebook's ability to bring connectivity and utility to the world, where it is already an utility in Brazil , India , Mexico and many other countries but not in USA or Canada he adds.
Facebook even mentioned that Whatsapp is not going to see any changes in its working model and would work as an Independent entity. There raises an question" How is facebook going to make money out of it?". If the $1 per download of an app is the monetizing point, facebook has to wait for whatsapp user count to reach 19 billion, which is an hard near future venture.
With that question of monetization if one looks for "what facebook is getting in this is deal" is "Users". facebook is an 1.2 billion users space and whatsapp is close to billion, with this if one thinks that facebook is going to double its users then that is fallacious. As the potential users of whatsapp will more likely own one facebook account. But facebook 's most of the messaging traffic is seen from USA and Canada and rest of the world is happy with its alternative. Facebook had no other substitute "To keep the users messaging traffic in its loop". So, it bought the alternative.
In order to understand why users messaging traffic is important for facebook one has to understand How the facebook monetization model run? 88% of facebook's revenue comes from its advertising and rest by selling credits for its gaming or other web applications. As most of its revenue is from Ads, facebook has taken its targeted demographic advertising to the another level where advertisers who uses the service can get the insights of its targeted users who has even shopped offline to check how well the Ad campaign works. This is done by a third-party company called Datalogix, a company which claims to be having a trillion shopper's database for demographic campaigning. Consumer shopping details and their personal information from loyalty programs of various brands is matched with the facebook 's data of personal information and targeted ad details to convince its advertising customers that campaigns made their sales better. Facebook claims that for an $1 spent in a ad by a company is getting $3 sales in return. With such strong Analytics department facebook made 2.2 billion in its 2013 Q3. Where 49% of its ad revenue came from its mobile app users.
These demographic campaign strategy is being used by almost all the marketing teams to get the best out of what they do. In 2008, Obama used it by incorporating the best Analytics team to find out the best time to air the debates and best time to call the people to raise the fund and campaign. To make this strategy more efficient companies have crossed the privacy norms already. Federal Trade Commission (FTC) and Electronic Privacy Information Centre (EPIC) are closely observing this move of companies and have already dragged facebook for court for its work with Datalogix, where it helped its advertisers to compare the customers shopping insights both offline and online.
This year beginning facebook saw one more case filed against it for scanning its users private messages and links shared across the network. I guess now one can guess what else might be behind this huge acquisition of whatsapp.
Unfortunately there are high chances of facebook to incorporate an data monitor to build the behavioural insights of its each user like their sleeping time, shopping habits and many more.
These are done by scanning the private messages and their usage history. Though one won't receive any ads in whatsapp as of now the user phone numbers given in whatsapp for identification and phone numbers given in facebook for security or authentication purpose is used as unique identifier among these claimed independently operating entities to build the each users behavioural insights.
For an instance, if there is an trip planning conversation happening in whatsapp then the users needn't be surprised to see ads popping in their facebook window about the tours and packages.
This is done by culling the information using an automated system and each user profiles are built on it for its advertisers. With this system facebook might be looking for the user profiles from the European and Asian countries where its ad revenue is not that huge. So , days are not far that all your conversations are used for mastering what ads to show you. Which is a kind of unethical way to use it.