It was a deal waiting to happen. Facebook's $19 billion purchase of WhatsApp is strategic for a number of reasons — and India, the world's next big hot market, could be the hottest of them all.
Consider this: India has 700 million GSM cellular service subscribers while the number of people with smartphones is roughly 20% of that, while overall internet users are a little more than 200 million. Smartphones are getting cheaper, and more important, the even cheaper "feature phones" that have limited apps (applications) are coming into the market to make it bigger.
Read: Facebook to buy messaging service WhatsApp for $19 billion
WhatsApp and its wannabe rivals that include Viber, WeChat and Hike, have been out to kill the SMS — the short messaging service. These services have created a peer-to-peer group messaging culture, like closed loops, and compared with Facebook updates or Twitter's 140-character tweets, these have a special appeal.
WhatsApp-Facebook deal is the most expensive so far. (Durga M Sengupta/HT)
Facebook is open about betting on two things: Asia and mobiles. Asia is increasingly a hyperbole for India, as China and Japan are not English language markets — although Facebook is enabled for other languages as well.
Read: Facebook-WhatsApp most expensive deal, other big buys
Read: Facebook buys WhatsApp: Zuckerberg explains why
Facebook's reach was automatically making it easier for it to make people use its Facebook Messenger, but WhatsApp could give it a big leap and unquestionable leadership by integrating two of the most popular apps — the social networking app and the SMS-substitute app — a joint operation. Cheaper smartphones and Facebook-enabled feature phones will accelerate the process.
Facebook can now go and tell Indian customers that they can simply do away with SMS bills by getting one of the two apps — which are bound to get technologically integrated soon. It can also partner with handset makers to have Facebook Messengers built-in. This is already happening, but with the integration, customers may themselves want it desperately. This means that hundreds of millions of customers can be easily added to Facebook's current Indian penetration of about 93 million, very fast. A study by eMarketer said last November that by 2016, India will overtake the US as the biggest market for Facebook.
Read: WhatsApp: a booming smartphone message service
Last but not the least, Facebook can use its mobile ad technology in a combo offer where it can aggregate for advertisers audiences based on both social networking and messaging.
WhatsApp is ideally suited to young people who increasingly prefer rapid-fire smartphone messaging to making calls or churning out email. Facebook has been eager to keep the devotion of young users who set trends and carry tech habits into the future.
Zuckerberg's status update on Facebook says he "excited" about striking this deal: Post by Mark Zuckerberg.