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WhatsApp could transform Facebook

Published Dec 3rd, 2012 8:40AM EST
WhatsApp Facebook Acquisition Rumor

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A report published over the weekend stated that Facebook (FB) is in talks to acquire WhatsApp. As a quick aside, TechCrunch for some reason claims that the most recent WhatsApp update on its messaging volume is 1 billion messages per day — in reality, WhatsApp reported this past August that it is handling 10 billion messages a day. What makes the WhatsApp story so compelling is the growth curve. The company announced the 1 billion message daily milestone in October 2011 and it took it just 10 months to vault to 10 billion messages a day.

Today, WhatsApp is the N0.1 app in 114 countries and a top-five app in 145 countries. Dutch operator KPN cited WhatsApp as one of the reasons its SMS traffic started sliding steeply in early 2011. Since then, SMS volumes in a variety of countries have started diving into deepening declines. The annual SMS volume drop in Spain topped 25% in the past summer. AT&T (T) and Verizon (VZ) probably moved SMS into a mandatory part of their new smartphone plans in 2012 partly out of fear of SMS decline starting to hit the U.S. market in 2013.

WhatsApp is an example of a stand-alone app that is performing better than an Apple (AAPL) alternative. Apple’s iMessage service is powerful, but where Apple hit 300 billion message milestone in roughly a year, WhatsApp is now handling a similar volume every month.

Several European carriers have recently discussed their concerns about SMS volume erosion caused by three factors: WhatsApp, Facebook and iMessage. If Facebook really does acquire WhatsApp, the resulting messaging behemoth would effectively combine two messaging systems that are already making major inroads in mobile.

WhatsApp has been able to effectively shut down real messaging app competition in Europe, North American and Latin America. In Asia, regional rivals like KakaoTalk are still powerful in key markets like Japan, Korea and China.

Nevertheless, WhatsApp is an example of a power app that has geographic reach truly rivaling Facebook. It’s a particularly effective weapon against Google (GOOG), since rapid messaging is one of Big G’s weak spots — Google has been unable to extend its hot Gmail service to an effective mobile messaging platform.

After launching mobile game company SpringToys tragically early in 2000, Tero Kuittinen spent eight years doing equity research at firms including Alliance Capital and Opstock. He is currently an analyst and VP of North American sales at mobile diagnostics and expense management Alekstra, and has contributed to, Forbes and Business 2.0 Magazine in addition to BGR.