Facebook Inc (NASDAQ:FB) founder Mark Zuckerberg says any service that connects 1 billion people is inherently very valuable.
Facebook Inc (NASDAQ:FB) shocked Wall Street when it decided to acquire messaging company WhatsApp for $19 billion, compared to $1 billion for Instagram in 2012. The app itself looks like a great fit, but the price tag seems hard to justify.
WhatsApp on track to reach 1 billion users: Zuckerberg
Speaking at the World Mobile Conference in Barcelona, Zuckerberg defended the decision because WhatsApp has nearly half a billion users, 70% of whom use it every day, and he expects it to hit one billion or more.
“We see WhatsApp on a path to connecting more than 1 billion people. There are very few services that can reach that many and they are all incredibly valuable,” he said, reports Julie Bort for Business Insider. “I think by itself WhatsApp is worth more than $19 billion. … I could be wrong. Maybe this is the one service that gets to a billion users and isn’t very valuable.”
He said that some other messaging services are already bringing in between $1 and $3 per user, but that isn’t really the point. Zuckerberg knows that current revenues don’t come close to justifying the purchase and he doesn’t expect to see any profits from the app in the next five years. Bringing WhatsApp into the Facebook fold frees its team from having to think about its business model, and lets them focus solely on reaching as many people as possible.
Zuckerberg aims to connect billions to mobile web
The acquisition also ties into one of the goals that Zuckerberg talked about in Barcelona – connecting billions more people to the mobile internet around the world. Right now, about 1 billion people have mobile phones, but of the remaining 6 billion about 80% are covered by 2G and 3G networks.
Facebook Inc (NASDAQ:FB) is investing with carriers to provide free basic internet service for everyone with a smartphone. Since it will mostly be text data (video and many other services won’t be provided) people who have never used the internet will be exposed to it for the first time and, Zuckerberg hopes, decide to purchase an affordable plan for full access to the net, reports Jillian D’Onfro for Business Insider. The carriers are able to sell new internet plans, Facebook gets to expand its giant user base even more, and everyone, no matter how poor, can fret over their Facebook Inc (NASDAQ:FB) profiles. Zuckerberg has already started programs in some countries through partnerships with local carriers and internet.org.