WhatsApp could transform Facebook from an iTunes into an App Store
Facebook is going to buy WhatsApp for lots of money, and that might be an incredible investment.
Facebook is going to buy WhatsApp for lots of money, and that might be an incredible investment. I linked to a story about it yesterday, but I want to expand on my thoughts.
If I remember correctly, Facebook has had trouble making money outside of advertising and investments whenever they’ve tried. They tried selling little gifts, novel little images to post directly to friends’ walls way back in the day when walls were all text. They started suggesting buying a Starbucks gift card for a friend’s birthday or something like that, which I haven’t paid much attention to. I’ve never touched the microtransactions for extra lives or what have you on any games, so I’m not sure if Facebook gets a cut from those or if purchases go directly to a game’s publisher. (I’m going to paint with a broad stroke and say most people get the same sleazy vibe from microtransactions as I do.)
Facebook can’t seem to get money from their customers, which hasn’t posed a big problem, but it’s still a huge opportunity if they can land it. The user base is invaluable, but it comes as a result of the declaration on the front page: “It’s free and always will be.” That makes me show up to Facebook almost specifically planning not to spend money, which is not good for expanding beyond an ad-based revenue model. Facebook’s ads, however, have conditioned me to the idea that I’m really only going to click on an advertisement if it looks like I might be interested in spending some money on it. That is, I’m okay with spending money on something I find on Facebook, but nothing that I’m going to use on Facebook. (It’s a similar story for friends posting to my news feed, but while I may be more ready to spend money after following their links, it’s less likely they’re going to be promoting something anyone wants me to buy.) WhatsApp costs one dollar per year after one year for free. Its users are used to the idea of spending money on that, even if it’s only a little, while Facebook users are not used to spending money on Facebook.
When Facebook bought Instagram, they kept Instagram’s whole design and experience nearly exactly the same, which I think was great for keeping its popularity going. I feel like they’ll do the same with WhatsApp—they’re not the type to buy a Grand Central Station and blandly rebrand it as a Google Voice just to make it fit into the monster brand. If that keeps the WhatsApp experience the same, Facebook now offers a service where people are willing to spend money. The gold Facebook wants isn’t the extra dollar per user per year: it’s the people who spent real money on at least one product, who could conceivably be persuaded to start spending some real money elsewhere.
While this might not be where they’re headed, as it’s a bundle of speculation by someone specifically out of the know, that could be a huge steal for them. Apple walked one product down a similar road: iTunes, a single product; the iTunes Store, a real service that accepted real money for real experiences; the App Store, which offers iOS apps in addition to an expanded array of media types; and the burgeoning use of iPhones with credit card-laden Apple ID’s to buy things directly in brick-and-mortar Apple Stores. It seems to be only a matter of time and logistics until all stores let you walk out with whatever you picked out, because your phone handles the transaction when you finished shopping.
Facebook, as a business, needs to make money. To get money, they need people who will spend money on them. Say they want to appeal to customers in addition to (or one day instead of) advertisers. To connect the customers to the company with cash, they need a platform to comfortably move them out of the idea that everything by Facebook is free. Facebook is in the middle of a well-publicized surge in the mobile market. While WhatsApp has landed them a huge swath of phone numbers, expanded their communications offerings, and so on, maybe they’re hoping for something more the trusty old standby of all business: money in exchange for goods and services.
So, WhatsApp could be Facebook’s iTunes. Whatever they would use it to sell is secondary to the fact that they could sell something. If it works, I’m sure they can figure out where to go from there.
