Facebook’s WhatsApp Deal Stran gles WeChat’s Overseas Expansion

The fate is always the best scriptwriter. In 2009， a young man named Brian Acton was rejected by Facebook when he planned to move from Yahoo to that company. Five years later， WhatsApp， a social communication app founded by him and his colleague， was acquired by Facebook with US$19 billion.

According to the files Facebook submitted to the U.S. Stock Exchanges Commission， the offer included US$4-billion cash and 180 million A-class circulation shares worth US$12 billion. In addition， Facebook needs to issue original employees of WhatsApp the restricted stock bonuses worth over US$3 billion.

From acquiring Instagram with US$1 billion to the deal of WhatsApp， Facebook expanded its stronghold several times. The latest deal is also the second largest one in the IT industry in terms of value， only next to the US$25-billion deal of Hewlett & Packards acquisition of Compaq. The value of WhatsApp equals 2.6 times as much as Nokia or 6.5 times of Motorola.

For Chinese IT giant Tecent， this is not good news， since it considers its social app WeChat as its only resort to the international development. “It is almost impossible for WeChat to challenge a giant like Facebook in the areas where WhatsApp is popular，” said Hong Bo， an IT reviewer in China.

On February 20， the stock price of Tecent dropped 3.1% to 564.5 HK dollars per share.

“Spending for Safety”

“So far as I see， WhatsApp is the only app that is more active than Face- book.”

Facebook CEO Mark Zackerburg said in the meeting of acquisitions. He explained why Facebook is willing to spend US$19 billion acquiring WhatsApp， a mobile communication app that collects users fees annually but has no games， ecommerce， friend circle， or even advertisements.

Maybe Kevin Kelly， the founder and editor-in-chief of Wire Magazine， could understand this. “The monopolization in the IT industry lasts a short while and the previous ruler is going to be replaced by the new products.”

Facebook used to be the symbol for IT， fashion and young men， but now its popularity is gradually ebbed away by WhatsApp， Snapchat and other mobile apps. In the financial reporting meeting last year， the senior executives of Facebook for the first time admitted that the number of daily active users decreased， most of whom were young men.

Compared with Facebook， WhatsApp had an amazing growth speed. In the first four years after Facebooks foundation， it recruited 150 million users， only one third of the number of WhatsApps recruiters in the same period. By now， WhatsApp is the global largest and most active instant communication platform for young men and teenagers. About 70% of the users logged onto it every day， higher than 62% proportion of daily active users of Facebook.endprint

This is a grand threat for Facebook， which is devoted to connecting people and information through Internet.

“The acquisition did not only solve Facebooks loss of teenage users. In the long-term viewpoint， these users can become important assets for Facebook in the mobile Internet，” a U.S. stock analyst said. “In addition， Facebook defeated Google in the competition， which meant that it spent US$19 billion eliminating a strong opponent in the future.”

Fu Sheng， CEO of Kingsoft Network， said that Facebook did not target assets， income or users， but the threat that could somewhat overthrow it in the future. “The time cost is the most important one. From its development and future， Facebooks acquisition of WhatsApp is to enhance its own advantages. It is a very dangerous thing if startups found loopholes in the core business of big companies. If the danger can be solved with money instantly， it is worth the price no matter how high it is.”

How to run the business that is not based on the advertisements is the biggest challenge for Facebook after buying WhatsApp. But now， Facebook is not in a hurry to extend WhatsApp to the commercial field like WeChat and Line； instead， it is going to maintain its original pattern， which aims at earning money from users with the annual expense of US$0，99 and focused on the increase of user scope.

WeChats Strong Opponent in Overseas Expansion

“This is a time with dramatic changes looming every day. The competition should be on the daily basis. So is the rule of the survival of the fittest.”Ma Huateng， CEO of Tecent said last year when talking about the competitors of WeChat in the overseas markets.

“WhatsApp is very powerful in Asia and Europe， but not that popular in the U.S.， where the strongest force might be Facebook. Now Facebook has turned to the mobile platform through acquiring Instagram and Facebook Messenger. But it is still under great influence of the PC-based Internet. In addition， new things come out incessantly，” said Ma Huateng when speaking of WhatsApp.

Now， WhatsApp， a competitor for WeChat， was acquired by Facebook， the champion of social media in the U.S.， even though it originally had a weak presence in that country. This is bad for WeChat， which attaches great importance to the internationalization.

The acquisition turned the international competition between WeChat and WhatsApp into the one between Tecent and Facebook. “Facebook is not smaller than Tecent and even has much bigger international influences than Tecent. This placed WeChat at a disadvantage in the international competition.”endprint

WhatsApp now has 450 million monthly daily active users. WeChat –both English and Chinese version – has 271.9 million active users on a monthly basis. Apart from WhatsApp， WeChat also confronts Line and Kakaotalk in the international competition.

This Janaury， Tecent pushed the English version of WeChat to the U.S. market and tried to attract users with convenience of logging in with Google accounts and sending discount vouchers for promotion.

However， different from WhatsApp that favors people-to-people communication， WeChat has the advantages of being an all-round app. It has broken out of the shell of instant communication and expand horizontally and vertically to other fields， closing a looplocked industry.

IT reviewer Bao Ran said that the high offer of WhatsApp from Facebook is good for Tecent and WeChat in both positive and negative sides.

“The negative influence might be the resistance to the globalization of WeChat， which is unable to expand to the circles of non-Chinese speakers. The positive influence is that the multiple usage of WeChat， such as games and O2O application， which is quite different from WhatsApp， could be highlighted in the overseas market. In addition， the huge number of Chinese speakers in the world can protect WeChat well without being invaded by others，” Bao Ran said.

Previously， CLSA Asia-Pacific Markets evaluated WeChat to be worth US$17.5 billion. The core of its value rests with its rising presence in Southeast Asia， Europe and Latin American， as well as the mobile games， which have become a new engine for its growth.endprint