※Source : http://www.albawaba.com/business/facebook-whatsapp-555994
On Wednesday February 19th 2014, Facebook announced that it would agree to buy WhatsApp for $19 billion in cash and stock. Despite the concern that the price is way overvalued, the movement itself appears to be aligned with its strategic direction including “Mobile Focus” and “Internet access improvement.” In accordance with the strategic focus, Mark Zuckerberg, the CEO of Facebook, said that “(mobile) messenger is the future of Facebook” according to a previous Facebook employee. There won’t be a better time than now to analyze the Facebook’s strategy based upon the recent activities of Facebook including the acquisition of WhatsApp.
1. Facebook is keeping its pace with “Mobile First” era.
With Zuckerbergs admitting that it was the company’s “biggest strategic mistake” to go with HTML5 instead of a native app, Facebook began to implement “Mobile First Strategy”. First, Facebook changed it mobile development process. Before it initiated the “Mobile First Strategy,” Facebook had developed the PC version service first then applied the PC version service to the mobile version service. Alternatively, now Facebook plans and develops its mobile service first then applies it to the PC version service.
[Pic1] Facebook’s mobile development process
※ Source : GMIC(2012)
Second, Facebook develops applications exclusively for mobile devices. For example, Facebook’s new app Paper has new UX(User eXperience), which is optimized for mobile devices.
[Pic2] Facebook Paper
A. Mobile First Era is already here.
Smartphone, the most widely used mobile device- changed the ICT(Internet Communication Technology) devices and services in remarkable ways. TabletPC also falls in the same category as smartphone, because TabletPC, ,in most cases, uses the same S/W such as OS(Operating System) and App(Application) as well as H/W including AP(Application Processor) and Memory as Smartphone. But mostly screen size of TabletPC is bigger than smartphone.
Nowadays, the mobile devices such as smartphone and TabletPC are everywhere, successfully replacing the non-mobile counterparts based on the ICT. In other words, the Mobile First Era has come. Among the many evidences emerging in the industry is that TabletPC and smartphone are replacing TV, PC and peripheral industries.
First, TabletPC has evolved in 3 phases as an ICT disruptor. At the phase 1, the role of TabletPC remained complementary to smartphone. Due to the bigger screen size, TabletPC enabled seniors and juniors, who had trouble to use the ICT service provided by the small-sized smartphone device, to enjoy benefits of the mobile service without smartphone. In Korea, Pablet(Phone+Tablet), a smartphone with over 5 inch-screen, is blocking the expansion of TabletPC market, as if the high-end feature phone had blocked the expansion of smartphone when the smartphone market had just begun.
The second phase of the TabletPC evolution witnesses the disruption of TV market. TV market had been disrupted even before the emergence of TablePC, but TabletPC catalyzes the upshots. For example, the OTT(Over The Top) service expansion and Personalization Trends contributed to the change in TV market. The OTT services such as Netflix enabled subscribers to watch contents anywhere without having to sit in front of TV. The trend of personalization disrupts the role of TV that had provided the same contents to the whole family members simultaneously.
Unlike other mobile devices, TabletPC is normally used within home replacing non-mobile devices in home such as TV. With the OTT and personalization trend, more subscribers are watching TV without sitting beside the TV set. Maitreyi Krishnaswamy, the director of Verizon FiOSTV, said that “TV is now just another app. 20% of Verizon FiOSTV subscribers is watching IPTV without TV. The expansion of TabletPC is critical factor of this trend. And in the short time 20 inch-screen TV set market will be disrupted by TabletPC.” The consumer research company Nielsen developed the concept ‘Zero TV Home’. This means that, while people still keep having TV sets, they will more likely to watch TV contents via mobile devices, but not via TV. Zero TV Home is just one of many examples that TabletPC is disrupting TV set market.
Lastly, TabletPC is disrupting computer market too. A computer, either intel-based PC or Mac, has normally been used for business purpose or entertainment purpose in an office or a home. As the boundary between PC and TabletPC becomes vague, TabletPC is rapidly replacing the share of PC for entertainment-purpose. In terms of hardware specification such as AP(Application Processor) core, Memory size and so on, there is no differentiation between them anymore. Also entertainment-purpose media is being converged to the web, the more mobility device, TabletPC, is encroaching PC market. With those changes, TabletPC supersedes the PC market.
However PC is still dominant in the business segment, mainly because the MS office, only available for PC, is a de facto standard in this area. Thus, business segment is still a battle field between PC and TabletPC. Even though many Office apps emerge in pursuit of replacing the MS office, these office apps often do not provide full compatibility with the de facto standard. Moreover, MS doesn’t fully support the widely used iOS and Android OS-based TabletPCs.
※Source : Displaysearch(2014)
But messenger evolves to absorb an on-line network depending on the recommendation and linking friend list of on-line service. For example, Kakaotalk recommends potential new friends based upon the users’ phone numbers. Not only that, Kakaotalk can also link an user’s friend list to the phone number database. With those mechanism, the previously off-line based messenger can be integrated with on-line network
※ Source : http://techcrunch.com/2012/12/04/global-messaging-market/messaging-marketshare1/
※ Source : http://techcrunch.com/2013/06/13/messaging-apps/
※ Source : http://www/eMarker.com
Second, Facebook can cover more geographical regions in messenger market, because WhatsApp is a dominant messenger in Europe and Latin America.
First of all, Facebook is not any more a startup company, which means that Facebook has lots of employees and sub-organizations. Because a company has to allocate the scare resources to many departments, the conflict among the sub-organization within a company is inevitable. From the viewpoint, keeping WhatsApp as an independent entity could help Facebook to minimize the organizational conflict that would have arisen from the concentration of resources to the messenger division within the boundary of the firm.
Lastly, TabletPC is disrupting computer market too. A computer, either intel-based PC or Mac, has normally been used for business purpose or entertainment purpose in an office or a home. As the boundary between PC and TabletPC becomes vague, TabletPC is rapidly replacing the share of PC for entertainment-purpose. In terms of hardware specification such as AP(Application Processor) core, Memory size and so on, there is no differentiation between them anymore. Also entertainment-purpose media is being converged to the web, the more mobility device, TabletPC, is encroaching PC market. With those changes, TabletPC supersedes the PC market.
However PC is still dominant in the business segment, mainly because the MS office, only available for PC, is a de facto standard in this area. Thus, business segment is still a battle field between PC and TabletPC. Even though many Office apps emerge in pursuit of replacing the MS office, these office apps often do not provide full compatibility with the de facto standard. Moreover, MS doesn’t fully support the widely used iOS and Android OS-based TabletPCs.
[Pic3] TV, notebook PC, TabletPC market
B. The value of mobile is breaking the wall between on-line and off-line
In the wired world, people should stay in front of PC if they want to have access to the on-line world, In this case, on-line world is easy to be isolated and separated from off-line real world. In the mobile era, however, people can have access to the on-line world anytime and anywhere they want with smartphones. They can get information both from on-line from off-line. For example, with location-based service like Yelp, users can see the information of a restaurant by their on-line access.C. The core value of messaging is similar to the mobile.
Messaging service can provide the same core value as other mobile service, bridging on-line and off-line world. Previously, a messenger ran with the stored phone numbers in a phonebook, which was normally built upon the off-line based network such as in-person meeting and the exchange of business cards. It means that the messenger was a communication hub of off-line network.But messenger evolves to absorb an on-line network depending on the recommendation and linking friend list of on-line service. For example, Kakaotalk recommends potential new friends based upon the users’ phone numbers. Not only that, Kakaotalk can also link an user’s friend list to the phone number database. With those mechanism, the previously off-line based messenger can be integrated with on-line network
[Pic4] Messenger can bridge two world.
2. Facebook is reaching more customers in new ways.
Even though Facebook is a dominant player in the overall SNS market, Facebook is still a small player in the messenger market. Facebook Messenger was launched late 2011. However, as many smartphone users had already communicated with other messengers, there was no reason for users to switch to the Facebook Messenger. By acquiring the WhatsApp messenger, Facebook expects to provide much richer SNS service to the customers.A. Facebook can increase the coverage in messaging service market.
First, Facebook adds a new channel of SNS with the acquisition of WhatsApp. A messenger falls in the same category as SNS, because people communicate and share their experiences and thoughts through a messenger, as they do with SNS. However there are some differences between a messenger and an existing SNS like Facebook or twitter. While a messenger focuses more on one to one communication, existing SNS does more on one to many or public communication. In addition, while real-time interaction matters both for a messenger and a SNS, a messenger requires much more through real-time service without delay than does an existing SNS.
[Pic5] the reach of messaging App and User penetration of Internet users
※ Source : http://techcrunch.com/2013/06/13/messaging-apps/
※ Source : http://www/eMarker.com
Second, Facebook can cover more geographical regions in messenger market, because WhatsApp is a dominant messenger in Europe and Latin America.
B. Facebook can expand messenger market more rapidly, overcoming the inertia of the incumbent.
Facebook will keep WhatsApp as an independent operator for a while in order to build the competitiveness in the messenger market, given the understanding that the messenger business is somewhat different from the existing SNS business. The nature of organization and the business-specific factor may result in the difference.First of all, Facebook is not any more a startup company, which means that Facebook has lots of employees and sub-organizations. Because a company has to allocate the scare resources to many departments, the conflict among the sub-organization within a company is inevitable. From the viewpoint, keeping WhatsApp as an independent entity could help Facebook to minimize the organizational conflict that would have arisen from the concentration of resources to the messenger division within the boundary of the firm.
Second, SNS and messenger business show the different pattern of consumer usage. In general, people use messenger service for one-to-one communication, while SNS for for one-to-multiple, public interaction The private nature of the usage requires a messenger service provider to develop the capability for prompt delivery of response and for security to keep privacy more than does a SNS provider. Therefore, the messenger business has to be armored with the different sets of technologies, investments, strategies and target segments from those for existing SNS service. For that reason, the two, somewhat similar businesses needs to be separately operated at least for a while and it should take some time to converge each other. However, the existing SNS and messenger will be integrated sonner or later to provide better and much richer social communication.