The most high-profile tech deal of this year has undoubtedly been Facebook’s $19bn acquisition of WhatsApp.
Even seasoned tech experts were shocked at the price tag, and there has been much speculation about Facebook’s motivation to pay out such a hefty price: Was it a defensive strategy? Is Facebook concerned about losing the “cool” factor amongst the younger audience? Is Facebook aiming to become a social media conglomerate?
On the face of it, WhatsApp was acquired for its audience, not its business model, a fairly rudimentary proposition based on charging a modest subscription for usage.
Assuming that the WhatsApp team backtrack on their “no ads” policy, it is likely that the WhatsApp deal will be justified on the basis of generating more ad inventory for Facebook, but given the rapid evolution of the digital social world, we can be sure that Facebook and hatsApp is not the end of the story.
What comes next? Competing against the formidable combined force of Facebook and WhatsApp, what will a social app have to do to differentiate itself and build the next global success story?
It is clear that there is one space into which Facebook and WhatsApp or indeed any of their biggest competitors such as Viber have not effectively addressed, and that is bringing strangers together.
All of these applications allow users only to communicate with those whom they already know – people whom they have “accepted” as friends or with whom they are already connected in many different ways.
Yet sometimes, your real-life social circle is not quite enough to share all the things you want to share. What if you are a Londoner learning Japanese but don’t know any native speakers apart from your teacher? What if you are dying to talk about a book or a film you have just finished that none of your friends have seen or read yet, or want to discuss online game strategies with like-minded fans?
We’ve seen a genuine demand around the world for opportunities to expand social circles – connecting with like-minded people is a fundamental human need. More than 20,000 people join Palringo every day for the chance to build communities across borders and generations based on shared interests, be it a shared love of cheeseburgers, learning languages, or playing Grand Theft Auto.
There is a strong future for social apps that focus on specific niches or focus on connecting people who might never meet under any other circumstances – but who should, because they are on the same wavelength. However, having a vision is only part of the story. You also need a business model and the WhatsApp deal raised some interesting questions in that regard.
The WhatsApp example demonstrates that sometimes it makes sense to forget about the business model and simply focus on obtaining the biggest possible audience in the hopes of being acquired by a buyer that can make sense of it all.
The consensus among the financial community is that this is a viable model so long as the company is based in Silicon Valley. A more reliable approach, however, is to build a sustainable company with a real business model and this can even be achieved on top of a real-time messaging platform.
This might mean selling items that enrich communications within a community, allowing members of a community to challenge each other within the context of competitions or offering games that can be played within one or several communities.
The future will belong to the start-ups that can provide customised entertainment, for instance, charging for games users can play through the app. Whatever form monetisation takes, it would have to be more than being bought by someone who wants to leverage the audience for commerce.
The key is innovation. The business to match and perhaps outperform WhatsApp’s success story will have to be more than a messaging platform; it will have to be the hub for thousands of communities, competitions, games and fundraising opportunities.
WhatsApp was the most widely discussed deal in recent history, but conversations will now focus on the way in which online messaging communities evolve, diversify, and reassess their business models – as well as change the ways in which we interact.
Tim Rea is CEO of messaging and mobile communities app Palringo.
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