CASE STUDY:

WHATSAPP ACQUISITION BY
FACEBOOK

Group 4:
1. Christian Natanael
2. Ferdian Pradha
3. M. Rizky Ullyn Nuha
4. Rakan Naufal Ihsan
Facebook (History)
Facebook was founded in 2004 by Harvard undergraduate Mark Zuckerberg, along with two of
his roommates. Facebook experienced rapid growth; it already had 150,000 users based at 30
different colleges by June 2004, a mere four months after its initial launch. Facebook continued
to expand its user base throughout 2006. It also developed additional features, such as
messaging, groups, discussion boards, video sharing, and mobile access. From 2011 to 2013, the
desktop-only user base steadily declined, while the mobile-only base increased significantly. The
majority of users were classified as both desktop and mobile users. As of June 30, 2014, Facebook
had 1.07 billion worldwide mobile monthly active users (MAUs), an increase of 31% over the
mobile MAUs of the previous year.
WhatsApp (History)
WhatsApp was founded in 2009 by former Yahoo! employees Jan Koum and Brian Acton.
WhatsApp was a fast, efficient text messaging app that also had video- and photo-sharing
capabilities. The founders prided themselves on the fact that WhatsApp focused on the basics,
providing a simple platform that had the best messaging service possible. WhatsApp was one of
the first cross-platform messaging apps; popular services at the time, such as iMessage or BBM,
required users to have the same type of phone to message each other freely.
Background of Case Study
Starting from February 2014 Facebook made the decision to acquire WhatsApp for $ 19 billion.
Until the acquisition offer closed in October 2014 with a final price of $ 22 billion (this price
includes $ 4.6 billion in cash, 178 million shares, and 46 million units of limited shares), it is
estimated that this price is around 10% of Facebook's market capitalization. The acquisition of
WhatsApp in the background by the very rapid development of the WhatsApp business to a
mobile messaging application that is very simple and easy and allows users to have contact with
others without paying text message fees so that WhatsApp is able to record revenue of $ 10
million in 2013. Of course With the potential for development and popularity that can be achieved
even higher by WhatsApp, Facebook sees opportunities that can be done to expand the user base
by connecting the social network website owned by Facebook with the messaging service from
WhatsApp to make it easier for users to share information with friends.
Type of Acquisition

Horizontal & Related Acquisition

● A company acquires another company in the same business, or industry or sector, that is,
a competitor.
● When Facebook acquiring Whatsapp. Whatsapp still exists with its brand name,
however, it is now owned by Facebook.
● Facebook & Whatsapp are both in the same industry, that is social media.
Strategic Diagnosis of Facebook
Strength
● The world's largest social media platform
● Strong Brand
● Strong Market Position
● Strong Advertising Business
● Solid loyal customer
● Active in Research & Development
● Effective Marketing Strategy
Strategic Diagnosis of Facebook
Weakness
● Privacy Issue
● Decreased user growth and engagement
● High penetration of mobile device users
● There are more attractive social media competitors
● Relying on Ads
● Fake News
Strategic Diagnosis of Facebook
Power
● The most visited social media site by 71% of adults in America in
2014 (based on Pew Research Center survey in 2014)
● Have 1393 millions active users in Q4 2014 (based on research by
Statista in 2015)
● Has a complete feature such as share photos, posts, messages,
videos, and live streaming
● Has features that support the development of business ventures
such as video ads, promoted posts, ads manager, ad creation tools,
audience networks, hashtags, etc.
Formulation of Technology and Strategy
 Facebook Monthly Active Users
1400
1230
1200
1056
Monthly active users (millions)

1000
845
800

608
600

400 360

200 145
58
1 6 12
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Axis Title

Source : J. Kiss, “Facebook’s 10th birthday: from college dorm to 1.23 billion users,” The Guardian, February 4, 2014,
http://www.theguardian.com/technology/2014/feb/04/facebook-10-years-mark-zuckerberg, accessed
September 2014.
 Facebook Desktop and Mobile MAUs (2011-2014)
1400

1200 247
268
285
1000 315
336
336
Users (millions)

359
800 376
403 671
413 667
413 649
600 424
414 620
600
562
400 523
478
441
432 488
200 376 341 399
325 296
189 219 254
102 126 157
0
Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014

Mobile-only MAU Mobile and Desktop MAU Desktop-only MAU

Source : E. Hamburger, “Facebook’s new stats: 1.32 billion users, 30 percent only use it on their phone,” The Verge,
July 23, 2014, http://www.theverge.com/2014/7/23/5930743/facebooks-new-stats-1-32-billion-usersper-
month-30-percent-only-use-it-on-their-phones, accessed October 2014.
 Share of Mobile App Time Spent, by Age (June 2014)
Source :
http://www.comscore.com/Insights
Facebook /Presentations-and-Whitepapers/2
014/The-US-Mobile-App-Report,
Pandora accessed October 2014.

Instagram
YouTube
Snapchat
Twitter
Kik Messenger
FB Messenger 55+
Netflix 35-54
iFunny 25-34
Skype 18-24
Gmail
Pinterest
Google Maps
Viggle
Candy Crush Saga
Yahoo Mail
Word With Friends
Solitaire
0 0.02 0.04 0.06 0.08 0.1 0.12 0.14 0.16 0.18 0.2
 Social Media Engagement (2012-2013)
60

50.7
50

40
Engagement Index

31.6
30

20 18.8
13.5
10 7.4 6.6
4.6 4.4

0
Facebook Tumblr Pinterest Instagram Twitter Snapchat WhatsApp LinkedIn

Social Media
Source : Data compiled by casewriter from Business Insider and comScore.
Note : Engagement index = % of desktop and smartphone time spent on the networks *100 / Multiplatform uniques
 FB Messenger KaKao LINE WeChat WhatsApp

Argentina 29% - - - 96%

Australia 19% 1% 4% 5% 22%

Brazil 32% - 4% - 90%

Percentage of Canada 17% 1% 2% 2% 18%

iPhone Users China

France
-

19%
2%

-
11%

1%
82%

-
15%

17%
Who Used Germany 29% - 1% - 91%

Leading Mobile Italy 33% - 3% - 93%

Messaging Apps Japan

Korea
18%

6%
9%

95%
71%

12%
6%

-
8%

3%
(June 2013) Mexico 31% - 14% - 94%

Spain 13% - 44% - 99%

UK 15% - 1% 1% 49%

USA 12% 1% 1% 1% 9%

Source : “Facebook, Inc. Mopping Up Mobile Demand Generation,” Deutsche Bank, February 20, 2014,
via Thomson Research, accessed September 2014.
WhatsApp
User Growth

Source : https://www.yumpu.com/en/document/read/23347864/facebook-02-19-14
 Age Distribution of WhatsApp User Base in the U.S as of February
2014
30%
28%
26%
25%

20%
Percentage Users

17%

15%
13%
11%
10%

5% 4%

0%
18-24 25-34 35-44 45-54 55-64 65+

Source : http://www.statista.com/statistics/290447/age-distribution-of-us-whatsapp-users/, accessed October 2014.

 WhatsApp’s Geographical Spread outside the Source :
http://www.emarketer.com/Article/
U.S., 2013 19-Billion-Heres-Whats-Up-with-
WhatsApp/1010633,
accessed October 2014.
Millions and % change vs. Prior year

Asia - Pacific 101 (189%)

Europe 45 (152%)

Latin America 38 (186%)

Middle East & Africa 15 (120%)

North America 7 (230%)

Worldwide 206 (175%)

 Determination of Strategic Need
That Acquisition of Technology Might Solve
● WhatsApp have continued to expand and achieved the remarkable growth faster than any
other company in history.
● The existence of WhatsApp poses a threat to Facebook.
● WhatsApp had penetrated many international markets.
● It lagged behind competitors in other major markets.
● Users didn’t want to download another App which is messenger.
● Some feared privacy would be compromised.
WILL IT CREATE VALUE?
Type of Partner Needed
Level of Compatibility:
User growth engagement was central to Apps success

Goal:
To connecting the world on mobile devices
Culture & System
Facebook:
● Users must to create an account to use the Apps.
● Have stability among receiving users and income by advertising.
● Collected information on its users and personal data.
WhatsApp:
● Only requiring a users phone number instead of asking to create an account.
● WhatsApp was very focused on getting its product right, the simplicity, speed, and
reliability.
● Avoiding ads allowed WhatsApp to keep its interface simple and focus on its product, not
marketing.
Design of Alliance
 Goal and Expectation

● Connect many more people around the world

● Achieve the mission of giving people the power to share

● Making the world more open and connected

● To deliver new and engaging mobile experiences

 Implement The Strategy
- Give the best service for their users
- Ensure the security of messages between users, to continue the user trust
- Upgrading the system to maximize user satisfaction
- Give the benefits for Facebook shareholders through dividends
- After acquisition, WhatsApp continued to run under their brand name and gave
WhatsApp freedom of operation
Question
1. Was it worth it for Facebook to pay $22 billion to acquire WhatsApp ?
2. Would Facebook be able to keep WhatsApp as a successful independently run company?
3. What would be the best approach to monetize the acquisition in the future ?
4. How could it create value if it did not integrate WhatsApp with Facebook ?
Question
● Was it worth it for Facebook to pay $22 billion to acquire WhatsApp ?

Yes, because based on the WhatsApp accounting report that was attached by Facebook in
September 2014 after the acquisition where Facebook received a goodwill valuation from
WhatsApp of $ 15.3 billion and connected it to the synergy expected from future growth with a
number of monetization opportunities and profitable strategies for ecosystem provision mobile
as well as Facebook's efforts to expand to offer their mobile messaging services. What's more,
Facebook bought WhatsApp at the perfect time when WhatsApp was at a disadvantage as it
suffered a fiscal loss of $ 140 million in 2013.
Question
● Would Facebook be able to keep WhatsApp as a successful independently run company?

Based on the data on the potential for WhatsApp monetization in this case study, it is said that
WhatsApp is predicted to be able to generate significant profits after being acquired by
Facebook with the percentage of paying users, from 35% in 2015 to 70% constantly from 2023
and an estimated total profit. obtained for $ 344 billion in 2015 to $ 4,891 billion in 2023. So that
Facebook can still make WhatsApp grow independently while still providing an integrated
service ecosystem between Facebook and WhatsApp.
Question
● What would be the best approach to monetize the acquisition in the future ?

The approach can be done by Facebook to monetize acquisitions in the future is to make the
integration of ecosystem services of the products they have today like Facebook, WhatsApp,
Instagram, and Oculus VR where users can take advantage of integrated ecosystem them to
communicate and share information with ease and Facebook can use it as telemetry data
material to study the habits of their users in order to be associated with more specific and
personalized advertisements.
Question
● How could it create value if it did not integrate WhatsApp with Facebook ?

Even if Facebook doesn't integrate WhatsApp into the Facebook service ecosystem. Facebook
can still build the value of WhatsApp by making WhatsApp a mobile messaging service to
replace SMS services that can be used at any time with independent development
Conclusions
Facebook's acquisition of WhatsApp is a good business strategy step because each of them can
complement and cover each other's shortcomings in order to defend themselves in the face of
increasingly fierce competition in the technology and communication industry. Where Facebook
benefits in the form of being able to adapt and enter the mobile messaging market which
indirectly also expands Facebook's business portfolio which was originally a social media service
provider. In addition, the presence of WhatsApp can help Facebook to solve the problem of
privacy data leakage that they have experienced with the knowledge of user data protection that
WhatsApp has.
Conclusions
While on the other hand WhatsApp also benefited from the acquisition of their business by
Facebook where they were able to cover the losses they previously received in 2013 and allow
WhatsApp to grow more rapidly under the auspices of Facebook. In addition, WhatsApp can also
expand their user base network by utilizing the large user base population that has been built by
Facebook.