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Facebook to acquire WhatsApp?

Social network could add broader messaging capabilities, new users and carrier deals, and a non-advertising revenue stream

By CAROLINE GABRIEL

Published: 4 December, 2012

READ MORE: M&A | Applications | Messaging

Facebook is in talks to acquire mobile messaging apps firm WhatsApp, according to industry reports. This would boost Facebook's presence in the mobile world, where it has conceded it is struggling to find a revenue model, despite massive increases in phone-based usage of its social network.

Following its troubled IPO earlier this year, Facebook said it would focus on applications and additional, chargeable functionality to improve its mobile business model. However, it said it had focused too early on HTML5 and pulled back from creating a full developer platform as a rival to that of Google. Instead, it will add to its range of apps and advertising options, but work closely with the existing smartphone platforms, as witnessed in its close integration into Apple's iOS 6.


An acquisition of WhatsApp would fit into that strategy. The potential deal was reported by the TechCrunch blog on Monday though both companies declined to comment. In its last quarterly report, Facebook reported monthly mobile user numbers had risen by 61% year-on-year to 604m, more than half its total base. WhatsApp has not disclosed user numbers, but in August its traffic crossed the 10bn messages-per-day mark, up from 2bn in March.

WhatsApp has also been cultivating relationships with powerful mobile carriers, which could benefit Facebook in terms of positioning on handsets, especially in markets where the cellcos still influence the user experience. Both software houses have worked to make their apps usable from featurephones as well as high end devices.

Indian cellco Reliance Communications recently announced a 'WhatsApp Plan' for GSM subscribers in an exclusive deal. It offers unlimited WhatsApp and Facebook usage to all prepaid GSM subscribers with no data charges. And 3 Hong Kong recently launched the WhatsApp Roaming Pass, which gives subscribers unlimited access to the service for HK$8 (US$1) a month, without that counting towards their data caps, and also provides daily passes for unlimited WhatsApp access in many countries round the world.

Priced at 99 cents, the ad-free WhatsApp Messenger application enables users to share text messages, voice notes, photos and videos with contacts across the globe, with no international messaging fees applied. It runs on the big five smartphone OSs, and is available in more than 100 countries and 750 mobile networks. Facebook does have its own Messenger app for iOS and Android, though this is ad-supported. WhatsApp would extend its reach to other operating systems and introduce a revenue stream which is not dependent on advertising, which is proving hard to monetize on small devices with limited screen real estate.

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