(Page 2 of 2)
what you built is interesting to Facebook or Google (preferably both at once), or valuations in the $10 billion to $20 billion range would be inconceivable.
That’s why I’d say the WhatsApp acquisition is an anomaly, rather than a case of venture-backed innovation firing on all cylinders. Sure, Koum and Acton are now billionaires, and Sequoia Capital’s ownership stake in WhatsApp, reported to be around 15 percent, means it’s in line for a $3.5 billion windfall, or about 60 times its investment. But as a couple of recent profiles of WhatsApp make clear, it’s all an instance of absurdly good luck. Koum and Acton didn’t originally set out to build a Wi-Fi-based instant messaging app, and their service only evolved in that direction after Apple changed its policy on push notifications in iOS in 2009 (giving developers the ability to make an alert pop up on users’ screens in response to events such as incoming messages).
You can’t arrange those sorts of accidents, which is why it would be so risky for other entrepreneurs to try to follow in WhatsApp’s footsteps. As a Bay Area-based technology reporter, I remember seeing the stars in startup founders’ eyes when Instagram fetched $1 billion, just two years after its creation. But the only other company to bear out those dreams so far is WhatsApp itself. I’m afraid that this latest acquisition will up the ante to a level that’s poisonously intoxicating and all but unattainable for other entrepreneurs.
Meanwhile, what does the acquisition mean for WhatsApp and Facebook users, and for technology consumers in general?
Well, in the short term, it means that all the data users trusted to WhatsApp—including everything in their mobile address books—now belongs to Facebook, and will likely be subject to Facebook’s ever-gyrating whims about privacy. In the medium term, it wouldn’t be surprising to see Facebook kill Messenger and replace it with a retooled or rebranded version of WhatsApp, or make new users log into Facebook in order to use WhatsApp.
In the long term, owning a 450-million-strong messaging network means Facebook will be in direct competition with mobile carriers. They’d probably like to hold on to their SMS businesses, but will find that more and more users are opting for app-based messaging and cutting back on their add-on services, the same way cord-cutters are dumping paid TV programming in favor of cable as a dumb pipe. I suppose that kind of competition could be good for mobile subscribers.
But it doesn’t mean that we should expect stunning new gains in the convenience or affordability of telecommunications. After all, as my friend Stever Robbins, a Boston-based executive coach, points out, instant messaging is 40-year-old technology—it only seems newer because startups like WhatsApp keep coming up with different ways to package it. “It is [from] our parents’ generation, and we hate to admit our parents did anything good, so if we reinvent it enough times on enough different platforms, that’s innovative!!” Stever writes, with more than a touch of sarcasm. I get where he’s coming from.
If you’ve gotten this far, you don’t need the TL;DR version of this column, but here it is anyway: $19 billion doesn’t mean much when it’s funny money that only Facebook or Google can afford to pay. It’s dumb to set out to build a company that Facebook or Google might want to buy, since even if you hit on something scalable, you can’t predict exactly what technologies they’ll want or need at the moment your thing scales.
Much better to try something totally new. And the timing for that may actually be good, since it’s clear now that Facebook can only get where it wants to go by acquiring other companies. It’s done innovating on its own, which means there’s room for someone to come along and wipe the game board clean.
By posting a comment, you agree to our terms and conditions.