Yesterday’s announcement that Facebook has acquired messaging service WhatsApp for $19 billion in cash and stock has left a lot of people grasping at straws as to the reasoning behind the deal. The running theories cover points like WhatsApp’s growth with teens (where Facebook is languishing), the prevelance of WhatsApp in countries where Facebook doesn’t rule (Europe, South America, Africa, to name a few) and of course the often-rumored “Facebook Phone“. But there’s a point that’s being missed, and it’s probably the single biggest one – the address book graph.
Facebook knows the value of your contacts, yet it’s the one thing that people hold most dear in this digital world. With releases such as Messenger and yet another walled garden, it wants complete access to those contacts (as well as control over them). The WhatsApp acquisition was essentially a $19 billion ticket into your personal address book, and with that untapped market in mind, the price looks like a bargain.
But there are still stumbling blocks when it comes to people trying to figure out Facebook’s motives. Let’s take a look for a moment and see what’s tripping up the tech press.
No Ads, No Games, No Gimmicks
One of the biggest “gotcha” points to the deal is that WhatsApp hasn’t spent a single dime in marketing itself, yet it’s joining an organization that is widely known for being an advertising giant. The question of how many ads will be needed to make up the purchase price is a bit of a red herring. WhatsApp co-founder Brian Acton has been vehemently against ads inside of the WhatsApp platform, opting instead of a $1 per year usage fee which has driven massive engagement for the app. Fellow co-founder Jan Koum stated in no uncertain terms that WhatsApp would remain autonomous, so don’t bet on seeing much change in how the app operates anytime soon.
No Data Retention
Another point to ponder is that, as part of the deal, Facebook will not have access to historical data from WhatsApp. From what the public is being told, that data will be wiped clean on the day of the move. While it’s easy to posit that Facebook would be able to better target advertising if it had access to past messages, a policy of zero data retention blows that theory out of the water as well.
But the point that’s been missed is that Facebook didn’t buy the past, it bought the future. From day zero of WhatsApp running under Facebook’s control, the company will have a completely new data point that gives it insight to your topics of interest and more importantly to your connections. It doesn’t need past data, it would simply be nice to have. But most WhatsApp customers won’t simply stop using the app because Facebook owns it. They will continue, and Facebook will have access to every piece of data that is transferred.
Relevance: The Keys to the Kingdom
People don’t seem to mind good advertising. But it’s not just about the quality of the message being sent, it’s about making sure that the right message is reaching the right person. This is the door that Facebook values more than anything else, and it’s exactly what the WhatsApp acquisition will give to the company.
Let’s be perfectly clear – Facebook paid $19 billion dollars to get access to your address book, and to see the connections between you and your contacts, as well as how you use them. It doesn’t need to integrate advertising into WhatsApp, it simply needs you to continue to use the application in the ways that you always have. The data that the application will eventually provide to Facebook will allow for better, more targeted advertising via a line of communication that has largely been cut off from Facebook or any of its partners in social media.
The Biggest Social Network
The average Facebook user has 250 “friends”. Females tend to have a bit more and teens level out around the 300 mark. By way of comparison, every one of us has far more entries in our address books. For example, the average FullContact Address Book user has 1,200 contacts. Further, adding someone to an address book tends to be a more intimate ordeal than simply clicking to accept a friend request. As people, our contacts are important to us on a level that a simple “friend” or follow can never imitate.
People regularly clean out their Facebook friends or Twitter follows and start anew. When was the last time that you deleted all of your phone or email’s contacts just so you could get a fresh start?
Without any doubt, our address books are the biggest, most important social networks and Facebook’s acquisition has given it a direct line into them. We can all agree that it is paramount that you are the one who is in control of your contacts and that you decide who gets access to them. Will this level of control happen with Facebook and WhatsApp? That remains to be seen.
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