Observations on the WhatsApp Acquisition

Yesterday's acquisition of WhatsApp is a great example of a few trends throughout the industry:

1) The importance of product

WhatsApp currently has 450 million active users, double that of Twitter, and is still growing at an insane rate (which probably hurts even more given Twitter's recent growth struggles), why is that? Sure, in no small part it is because they are the first major company to really disrupt and take on the SMS/MMS monopoly - Why ever pay for text messages through your provider if you can send pictures/chats to anyone in the world for (essentially) nothing? - but their success in becoming that major player is their single focus on the core of their product, they wanted to provide mobile messaging - and thats what they focused on. As users grew they could have spun out with gaming/video chat/desktop clients/etc but they stayed focused on their core product and did it well.

It is telling that founder Jan had this note stuck on his desk:
No ads!
No games!
No gimmicks!

Also, choosing to monetise by annual subscription rather than in-app adverts showed dedication to the statements above - having used pricing as a way to throttle growth to a rate they could manage, they grew confident that the model would work and didn't need to detract from their product with  gimmicks or ads.

Whats more, by focusing on the simplicity and usability of their core product, it also meant they could focus on the technical stability of their platform -  I doubt if they had spun out they would have been able to maintain their impressive tech stats - 32 engineers, 450million active users, 99.9% uptime.  Twitter's "Fail Whale" was infamous during their period of growth as their platform couldn't scale to handle it, but with a more accelerated growth WhatsApp's simplicity has allowed them to maintain 99.9% uptime - failing to keep platform stability could have easily seen them lose their position in the market and not be signing the deal they have.

2) The importance of mobile

Mobile is the platform of growth for the future. We are, and will continue to see more and more mobile-first (if not mobile only) startups. Instagram, Snapchat, WhatsApp - the three biggest recent startup exits - all mobile focused.

And should we be suprised? Let's have a look:
  • On average, people use their phones 150 times a day
  • There are currently ~1 billion people using smart phones
  • But, there are still ~6 billion using feature phones - so huge room fro growth

Smartphone usage has exploded, other mobile computing is growing as traditional computing devices decline.  There is a huge market opportunity for new mobile users, and for many parts of the world, mobile is providing first experience of the internet.

What's more, the mobile eco-system is offering a new opportunity for startups to take on social incumbents - For a long time, Facebook has had the crown of social, and could not be tumbled by others efforts, primarily because it's where people are. It's where people's photos are. It's where people's social graphs are. Sure Facebook's design is kinda clunky now, and kinda ugly, with terrible ads all over the place, but who is going to try and convince their entire social graph to move?  Exactly.  But the mobile eco-system offers something different - your mobile device contains your contacts/address book, your photos, your videos - more and more, your mobile device is becoming your social platform that really holds your social graph.

Mobile is the future.