Facebook's bid to take on Google

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The $19 billion USD that Facebook spent to acquire WhatsApp yesterday has delivered one of the world’s most stunning stories of wealth creation. After just ten days of discussion with Facebook, a principled developer from the Ukraine became worth $6.8 billion USD, overnight.

That principled developer is Jan Koum, the cofounder of Whatsapp, whose famous words, “No ads! No games! No gimmicks!” are already being canonized by various news outlets. Perhaps they're a refreshing counter to Zuckerberg’s refrain about Facebook’s mission to “make the world more open and connected,” which may never shake its association with his nervous, sweaty, stumbling reply to questions about Facebook’s privacy policy at the D8 conference back in 2010.

Despite being at the epicenter of one of the most shocking deals in the history of tech acquisitions (for context, Whatsapp's valuation exceeds Whole Foods, Gap, and Sony), Koum seems to be against hype. He's the kind of guy who tweets things like “If you run a startup and your goal is to get on Techcrunch, you are doing it wrong… Next person to call me an entrepreneur is getting punched in the face by my bodyguard,” as Tim Bradshaw at the FT notes.

Theories for the scandalous price tag include the possibility that Facebook wants to leverage WhatsApp’s crazy growth and presence in emerging markets, especially since mobile is driving all of Facebook’s revenue growth. Sarah Lacy at Pando claims, however, that it’s not the teen demographic – dubbed “Facebook-nevers” – that the social network is after, nor its global presence, but photos: WhatsApp is processing 500 million photos a day, and Facebook wants to own photo sharing.

Maybe; another large possibility is that Facebook is simply chasing its biggest competitor: Google.

“Facebook wants to own every vertical,” argues Abed Agha, the founder of Vinelab, a talent management and entertainment agency, based in Dubai with offices in Beirut.

“Google has the services and is trying to build its social graph; Facebook has a social graph, and is trying to build services on top. Facebook needs to scale its services so that it can compete on Google Ad inventory,” Agha illustrates. By building in the content space with Paper, and snapping up companies in photo and messaging segments, Facebook is building an empire that could one day rival Google’s reach, he argues, pointing out that one of the main products that Facebook is missing is a video platform.

Zuckerburg has said that Facebook will maintain WhatsApp as an ad-free service, at least for the next few years, as it focuses on continuing to outpace its chat service competitors, TechCrunch reports.

Yet that doesn’t mean that WhatsApp’s data privacy policy will remain intact. Currently, WhatsApp does not collect the personal or demographic information that Facebook and Google use to target ads, Bradshaw notes.

If Facebook is looking to take on its biggest rival, will that privacy policy remain?

After all, WhatsApp isn’t the only service adding 1 million users a day. Users who are concerned about privacy have been joining Telegram, an application that allows to send heavily encrypted messages that can self-destruct, in groups of up to 100 users. Thanks to a focus on privacy and security, it’s been called “the answer for those that want to move away from WhatsApp.”

Telegram lags far behind WhatsApp in terms of users. As of October 2013, it had 100,000 daily active users, as compared to WhatsApp’s 315 million daily active users, or an estimated 72% of its 450 million total active users. Yet evidence suggests that Telegram may be adding 1 million users a day, swiftly closing ranks with WhatsApp. Most of its users, a Russian site reports, come from the Middle East, specifically from Saudi Arabia, Oman, Bahrain, and Lebanon.

If Facebook is looking to take on Google, the WhatsApp acquisition may eventually seem like a small price to pay if Facebook can extend its ad reach to a broader, swiftly growing global user base. Or, better yet, perhaps it will leverage WhatsApp’s $1 USD per year subscription policy to get users to eventually pay for Facebook products.

Yet how loyal are users to a chat platform? If Facebook confuses WhatsApp users about its data privacy, as it’s done numerous times on its own platform, will users abandon WhatsApp for something more secure? 

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