The lesson from Facebook's acquisition of WhatsApp? Never rest

No company wants to become like Nokia, a firm that failed to keep up

David Crookes@davidcrookes
Thursday 20 February 2014 15:59

Flick through the business pages of any newspaper and you will see countless stories about acquisitions and takeovers but few of them get people talking quite so much as those involving technology companies.

It is as if the dotcom bubble had never grown to circus-like proportions and burst so dramatically as it did at the turn of the 21st century, ruining companies such as and in the process.

So it is today that we turn on to news that Facebook has bought WhatsApp in a deal worth $19 billion. It beats, by some margin, the $1 billion the social network paid for the photo-sharing service Instagram. It is also close to tripling the $7.2 billion fee that Microsoft agreed with Nokia for its entire mobile phone business.

But this is good news. WhatsApp was launched five years ago by Americans Brian Acton and Jan Koum, both having decided to leave their jobs at Yahoo! and go it alone. Their mission was a simple one: “building a cool product used globally by everyone.” “Nothing else,” they say, “mattered to us.”

That they achieved their aim is enough cause for celebration. Their “over-the-top” messaging service can be used on any smartphone without users having to eat up text allowances. They have a user base of 400 million each month. A million new users sign up each day. But now Acton and Koum are rich beyond their dreams - just like Instagram founders Kevin Systrom and Mike Krieger before them.


What this does is inspire hope. It shows that a good, attractive and well-implemented idea will be rewarded in some way, either through cold hard cash or through popularity. It drives pioneers and entrepreneurs, whether in Silicon Valley or in London's Silicon Roundabout, and it helps to push them forwards.

They see bids like this one succeeding and their jaws drop. Equally, they hear about the people behind the photo messaging app SnapChat rejecting Facebook's $3 billion advance and they know that there is a chance they can also make it big alone.

As a result, we're seeing innovation and challenges. The WhatsApp developers didn't just create a messaging service, they grew it into an effective rival to Facebook which is undoubtedly why it decided to step in with an offer. The ability to create groups within WhatsApp, for example, turned it into a social network in its own right. This in turn inspired other people to have a go- such as Hike which offers offline and push-to-talk messaging (like walkie-talkies).

This keeps everyone on their toes. Those small companies that grow big know they have to keep looking over their shoulder just in case two people in a garage come up with something that takes the world by storm. Investors become more willing to take a gamble on the little people who believe their idea will be a winner.

So nobody rests and, if they do, they are found wanting. Facebook learned this the hard way when it was slow to latch on to the growing numbers of smartphone users. It launched an iPhone website in 2007, the same year that Apple launched its smartphone and an app came a year later but it is only recently that it has started to take advantage of the many features a smartphone has to offer.

As well as acquiring other companies, it is now looking to develop its own initiatives, even if it that means borrowing some ideas. The new Paper app has been very well received, following the likes of Feedly with a news reader fromat that actually makes far better smartphone use of Facebook. It also updated its Android app last month so that it could read text messages on the user's smartphone.

No company wants to become like Nokia, a firm that was once at the top of its game but failed to keep up when Apple and then Android began to dominate the smartphone space. There's a stark reason why, at this moment in time, WhatsApp costs $19 billion and why Nokia can be bought for a small proportion of that sum. The game changes fast, and you’ve got to move with it.

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