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Why Facebook Paid $16 Billion For WhatsApp and What It Means For Music

whatsappLate yesterday Facebook paid $16 billion for WhatsApp, a mobile messaging app that many in the U.S. have never heard of.  According the the SEC filing, the price includes $14 billion in cash and $12 billion in Facebook stock, plus another $3 billion in restricted stock that may be paid to WhatsApp staffers over the next four years.

Why?

  • Users: WhatsApp has 450 million users, 70% of which use the service daily; and most are younger, a demographic that has been using Facebook less often in recent months. 
  • Growth: WhatsApp is adding 1 million new users a day. Mark Zuckerberg says its the only network that's ever grown faster than Facebook. "WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO. 
  • Reach: Accurate user location stats are hard to come by, but the majority of WhatsApp users are outside of the US and widen Facebook's global reach. According to the Financial Times, WhatsApp "has done to SMS on mobile phones what Skype did to international calling on landlines."
  • Volume: On a peak day, WhatsApp's processes 27 billion messages, approaching the volume of all global telecom SMS traffic.

What Does Facebook's WhatsApp Purchase Mean For Music?

A first glance, the partnership seems a postive development. Facebook fosters direct to fan communications and has proven a boon to music marketers. What's good for Facebook is good for music, and its just added 450 million mostly young, mostly overseas users. 

image from musically.comBut the success of WhatsApp and the price that Facebook paid for it is also further acknowledgement that younger users are abandoning social networks in favor of more private and even more ephemeral one-to-one or one-t- a-few communications. WhatsApp has Wall, no stream, no Likes and no ads or other opportunities to market.

In fact WhatsApp's founder keeps a note on his desk that reads "No Ads! No Games! No Gimmick!" After the purchase, "WhatsApp will remain autonomous and operate independently," wrote WhatsApp CEO Jan Koum in a blog post yesterday. "You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using. And you can still count on absolutely no ads interrupting your communication.”

So, Facebook just bought the place where exiting teens are landing. But, for now at least, it's not offering access to those 450+ million users to artists, brands and others who would still like to communicate with them. 

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