5 Things to Learn from the $19 Billion Facebook Like of Whatsapp

Mar 10, 2014 BY Francis Ssennoga

The $19 billion deal between Facebook and Whatsapp received tremendous attention throughout the world. The mixed feelings that came with this block buster buy, varied from joy, pride, awe, shock and of course; envy. But regardless of the feelings you had when you learnt of the news, you can still take away something from the Whatsapp pay day. I noted 5 key things you could learn from the buy. Before the scoop though, let me revisit some of the emotions that the deal triggered in people the day of the news.

As Jan Koum, the Whatsapp founder was sealing the $19 billion deal with Facebook, Russia's $15 billion one with Ukraine was falling apart. As fresh ink finalized the Whatsapp buy, trouble was brewing in Ukraine, Jan's birth country. The $50 billion successful winter Olympics in Sochi, had just made Russia proud and then suddenly, Russian boots were matching onto Ukraine's Crimea.

Events like these in this part of the world had something to do with the innovation Ukrainian born Koum invented. Koum's family back in Ukraine was wary of phone tapping and did everything to devise new ways of communicating to keep the government at bay. With this psych Jan founded Whatsapp, a new way to keep in touch with his friends including those still living abroad in a not so free environment. Now Whatsapp allows Facebook to reach world corners that had been sealed off from it by the actions of some governments.

As the mega deal unfolded in the US, many in Ukraine had little time to cerebrate what one of them had achieved in faraway America. They had to deal with imminent danger at home. But there were more people with mixed feelings.

For some start-up founders who have been toiling away to become the next big thing, the Facebook - Whatsapp mega deal installed feelings of envy. Jan Koum had now made it big but he had been at this for only five years and he now had big bucks to show for it. This is not always the case for years and even for lifetimes at some start-ups. On the other hand the deal gave hope to a number of hardworking entrepreneurs.

Many felt joy for the new kids on the block given that Koum once lived on food stamps his mom secured for the new immigrant family from Ukraine. This is a typical American entrepreneur story except that Koum did not have a garage to set shop in. Koum underscored this by signing the Facebook agreement papers in front of a Mountain View welfare center, the place he used to line up for hand-outs.

As it sometimes happens when people line up for hand-outs from government welfare centers across the US, some people were bashing Facebook for liking Whatsapp so much that they would be willing to pay $19 billion for what they thought could be peanuts. Few could quickly figure out the big motivation behind this big buy that came with no warning message, even from Whatsapp.

Some of the reactions above changed when people realized that Facebook may be unto something big. I personally noted 5 things you can learn from this deal.

The battle is for users
Users have become one of the most valuable things people want to acquire when buying a company. Which means that you can have the best business plan but without users to show, your pitch is dead on arrival. Whatsapp's 450 million users was a source of envy for many especially because these users were acquired on the cheap and with one of the smallest team of engineers for a user base this size. There is now a growing consistent valuation for each user which is about $40 a person based on recent buys and trends.

Good Management is Good Buy
The oracle of Omaha - Warren Buffet, one of the greatest investors of all times, looks at management as one of the keys to success in investment and in buying companies. Well run companies end up being winners. Whatsapp was incorporated from the start by Jan and he kept it small, cutting its costs drastically. Whatsapp is like a phone company minus the huge costs that come with operating a company like T-mobile or Sprint. With 55 employees, they have 450 million users and a very small debt. This is not always the case with a company doing what Whatsapp has been able to do, that is, sending texts, video, music, pictures, voice all over the world with no huge marketing budget. This can kill a lot of competition from the get go. For those seeking careers, investors or those evaluating start-up partnerships or buys, these factors are key.

It is all about growth
Facebook's growth rate was stalling and there was a dropping usage in the 18-24 years age group which is a crucial segment for facebook. Yet Whatsapp has grown more than Facebook in the last 5 years with a growing number of younger people. In figures, Snapchat beats Whatsapp in young people percentage (18 - 24) with over 50% of its users in this category. Whatsapp has about 30% of this age group among its users while Facebook has a much lower number. More still, users were staying longer on Whatsapp which attracted Facebook's attention. Facebook needs longer engagement times and Whatsapp presented this growth potential. With Whatsapp, Facebook has potential to grow in new markets especially abroad, will grow in one of the most coveted age groups and also grow in usage times.

Mobile is the New King
Trends show that mobile is the new king and this is confirmed by the rapid growth of Whatsapp in 5 years. Masayoshi Son, founder and Chairman of Softbank said that mobile is the new frontier which the US surprisingly is not leading in. Which means that US companies like Facebook are being unfriended when it comes to being big players on the mobile front. With Whatsapp, Facebook is going to recapture its growth rate and stay in the game. The American educated Masayoshi, a big tech industry player in his own right from Japan envies Facebook and liked the Whatsapp deal. He said, he would have done the same if an opportunity had presented itself. If you are buying stock, buying a company or if you are a CEO looking for growth, you must pay close attention to the mobile front.

The Horizontal Way Up
The new way of climbing the corporate ladder is by being an entrepreneur. Brian Acton, Whatsapp's co-founder was rejected by both Facebook and Twitter. But Brian was able to get into Facebook via the red carpet as co-founder of Whatsapp. So did people from Instagram and others. Google acquired Andrew Rubin's Android phone operating system and made Andrew Senior Vice President of Mobile and Digital Content in Google. This is a popular trend and it is like using a horizontal way up having made the rise in a start-up somewhere else. This is a new alternative to 'working your way up'. Take note if you are a potential new hire or you are planning your career. Entrepreneurs are trending now.

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The $19 billion deal between Facebook and Whatsapp received tremendous attention throughout the world. The mixed feelings that came with this block buster buy, varied from joy, pride, awe, shock and of course; envy. But regardless of the feelings you had when you learnt of the news, you can still take away something from the Whatsapp pay day. I noted 5 key things you could learn from the buy. Before the scoop though, let me revisit some of the emotions that the deal triggered in people the day of the news.

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