$19B 4 txt app WhatsApp...omg! - Case Solution

WhatsApp: The Best Facebook Purchase Ever?

An Analysis of the Synergies and Monetization Options of WhatsApp

Following its Acquisition by Facebook in 2014

Management summary

• How can Facebook integrate WhatsApp after its acquisition, including but not limited to monetization and leveraging synergies, to maximize the $22bn investment?
• Facebook, as a holding company, should both leverage the strategic synergies and realize the monetization potential of WhatsApp in sequential waves in the next eight years.

1.1) Facebook should stimulate its engagement rates – especially among teens
1.2) Facebook should build up a user base in the Asian market
1.3) Facebook should leverage WA’s capabilities as a photo-sharing platform and SMS replacement tool

2.1) WA should follow other peer’s “Freemium” (such as Line), adding stickers and games to the app’s capabilities in 2015 – leading to expected USD 1.5 Bn additional revenues
2.2) WA should add P2P payments in 2015 as they will become a meaningful business in the following years – leading to expected USD 0.2 Bn additional revenues
2.3) WA should return to a subscription model in 2017, starting at 1$ per user and increasing the fee by 0.25$ with each $500 million increase in total users – leading to expected USD 2.3 Bn additional revenues
2.4) WA should increase its revenues through advertising in 2020, going gradually from low to high disruption until 2020 – leading to expected USD 5.1 Bn additional revenues in 2022.

The messaging service industry had an attractive 10% CAGR between 2010 and 2014, while organic growth is difficult as the market is very consolidated.

Very attractive industry to enter for any technology player, especially through acquisitions:

1. Attractive market growth of 50% between 2010 and 2014
2. Untapped potential due to only 1.7bn users (23% of the global population) using instant messaging in 2014
3. A consolidated market with fierce competition could make organic growth difficult

The 2014 picture of the IM industry created through the Five Forces analysis exposes a…