WhatsApp – Zuckerberg’s Keynote at Mobile World Congress

Facebook Founder Mark Zuckerberg delivers keynote address at Mobile World Congress on internet connectivity, privacy and the recent WhatsApp acquisition.

BARCELONA, Mobile World Congress 2014: Facebook Founder Mark Zuckerberg delivers keynote address on internet connectivity, privacy and the recent WhatsApp acquisition. Was $19bn a sensible price? Zuckerberg suggests it might have been a bargain…

Facebook’s WhatsApp Acquisition

Analysts speculated that Facebook’s falling popularity among teenagers was a key factor in its decision to buy WhatsApp. Others argued that it was a protectionist move to prevent a Google or Microsoft acquisition. Unsurprisingly Zuckerberg has bigger plans in mind: “WhatsApp is the most engaging app we’ve ever seen on mobile, it blows everything else away, but it’s Jan Koum’s vision, to connect billions of people. That’s what made WhatsApp a good fit.”

$19bn was an eye watering price but the valuation has a lot to do with the existing WhatsApp user base and importantly the engagement level within that user base. In a digital, social world, ‘value is proportional’ to audience size and level of audience engagement. Zuckerberg (possibly taking a bullish media stance) has suggested WhatsApp could be worth significantly more than the agreed price.

Many got their fingers burnt in the .com bust in 2000. Insane valuations and ‘smoke and mirrors’ companies were plentiful and badly hurt some naive and experienced investors alike. Seasoned analysts have good reason to caution (and even sneer) at Zuckerberg’s profligacy, but is this a new kind of ‘big economic thinking’?

Zuckerberg’s keynote was brimming with references to “Connecting the World”, not a surprise given his intimate involvement with Nokia, announcing their first Android smartphones have similar aspirations in emerging markets. As Zuckerberg highlighted in his speech, data is more of a barrier than the device, so carrier networks are really the key blocker to rapid adoption.

When your aspirations are as big as Facebook’s, making $19bn moves makes sense. You wont connect billions to a new mobile web by thinking solely about organic growth and incremental offerings. Part of me thinks the WhatsApp valuation was extremely generous and part of me thinks this is an immensely bold move that challenges everyone to think about digital economics on an entirely new scale (perhaps “Big Economics”).

The Facebook Effect: The Real Inside Story of Mark Zuckerberg and the World’s Fastest Growing Company

Facebook, Privacy and the NSA

Facebook, Microsoft, Google and other big US players took some hard knocks during the revelations about the NSA and PRISM. Zuckerberg moved to allay fears over possible changes to the WhatsApps ‘privacy model’ saying, “We are absolutely not going to change plans around WhatsApp and the way it uses user data. WhatsApp is going to operate completely autonomously. They might use people and infrastructure to grow, but the vision is to keep the service exactly the same. They do not keep the content you send, and we’re not going to change that.”

Billionaire Boy: Mark Zuckerberg in His Own Words

WhatsApp users might take reassurance, but realists will understand Facebook’s gargantuan problem of trying to recoup a $19bn outlay. Some revenue will come from direct year-on-year end-user licensing, a lot more from data analytics feeding advertising feeding sales.

Zuckerberg no doubt has genuine altruistic intent in his quest to connect ‘the digitally dispossessed’. There are good studies to suggest that major productivity gains could be made in emerging economies through better digital access. This is equally true of education and healthcare.

But don’t kid yourself that a connected world, with dominant platforms isn’t also about creating new markets and new digital consumers. Big Economics is corporations pushing macroeconomic buttons on a previously unseen scale. If that seems hard to believe, then think hard about why a single mobile application has a notional value which is close to 50% of the entire UK defence budget.

I would like to have heard Zuckerberg announce more support for social enterprises and ‘venture philanthropy’. I have long held the view that philanthrocapitalism has a major part to play in emerging economies and companies like Facebook could provide services, funding and broker platforms to enable it. Maybe Mark will have an epiphany around Facebook, micro-lending, Kickstarter for an emerging world and his ‘connecting the world’ vision with and WhatsApp.

Further Reading on Mark Zuckerberg, Facebook and WhatsApp

By Steve Nimmons

Steve is a Certified European Engineer, Chartered Engineer, Chartered Fellow of the British Computer Society, Fellow of the Institution of Engineering and Technology, Royal Society of Arts, Linnean Society and Society of Antiquaries of Scotland. He is an Electric Circle Patron of the Royal Institution of Great Britain, a Liveryman and Freeman of London and serves on numerous industry panels. He is a member of Chatham House, the Royal United Services Institute and the Chartered Institute of Journalists.