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Couple Quick Thoughts on the Facebook/WhatsApp Deal

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February 19, 2014 – Comments (0)

Hey everybody, 

The average global Internet user spends 2.5 hours each day on social media. And that number is not trending down. Obviously Facebook knows this and that's the impetus of this deal. And while $16 billion ain't chump change at least they're doing this now instead of last summer when shares were swapping hands for half what they are today. Cheap (or at least cheaper) currency is a good thing here.

Social networking is becoming a basic human form of communication. The Internet is disrupting everything that we've known and grown up with and I don't see anything really changing that.

So imagine this total share of social media time spent each day as a big pizza (mmmmmmmmmm.....pizza). Basically Facebook is trying to claim as much of this pizza as they can. For a long time (before the Instagram acquisition even) Facebook claimed about half the pizza anyway with the rest going to the other players. Changing social media behavior becomes very difficult when you reach that level of 450 million plus users. It's why Facebook's messaging app will never overtake WhatsApp. Rather than keep on dumping money into a "lost cause" Facebook's dumping money into something that already has a proven track record and massive user base. I'm not sitting here saying the price tag makes sense; maybe it does, maybe it doesn't. But unless something really special comes along I don't see WhatsApp fading into obscurity anytime soon. And it's plain as day that Facebook will continue buying up as much of that pizza as they can so that they can own as many minutes of that social media time per day spent as possible.

If you believe that social media is here to stay and will continue to develop over time as a growing part of the Internet user's day then you might not be so quick to dismiss this acquisition. No question you need to be looking at it from a decade-out perspective, but that's what Foolish investing is all about baby. Oh yeah, also remember that two-thirds of the world has yet to be connected. So there's that too.

Foolish best,

Jason

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