Will WhatsApp Acquisition Help FB Expand In India?

by Sohini Bagchi    Feb 21, 2014

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As Facebook sets out to buy WhatsApp for $19 billion, Mark Zuckerberg, Facebook co-founder and CEO posted on his Facebook page, “Our mission is to make the world more open and connected.” And by saying so, he is certainly not pointing at the US alone, but is aiming at expanding its footprints in emerging markets of Latin America and Asia, especially India, where mobile instant messaging app is hot. Experts are wondering how will the deal stand out in India and impact the overall Asian market.

A lot of sense for India

Many believe that Facebook’s decision to buy messaging app WhatsApp makes a lot of sense for India, with a 110 million mobile internet population and where most online users access the Internet mainly through their mobile phones. This is a pertinent reason why the deal can be even more important for the Indian market.

As per TRAI estimate, Facebook has close to 100 million active users in India, 70% of them are mobile users. WhatsApp’s estimated 30-35 million Indian mobile users will add to it now, resulting to an estimated 40% access social network on mobile devices. Meanwhile, WhatsApp has been the top driver for smartphone penetration in India, and this is not an opportunity many companies would want to miss out on. A study by eMarketer further noted that by 2016, India will overtake the US as the biggest market for Facebook. And a deal like this one with accelerate the process, believe experts. Needless to say, cheaper smartphones and Facebook-enabled feature phones will accelerate the process. “Together, the two add up to a potent army driving up connected smartphone usage in India,” technology critic and writer Prasanto K. Roy writes in Economic Times.

In the Indian market Facebook is already partnering with handset makers to have Facebook Messengers built-in. some believe that with the latest integration, it can be a strong indicator to customers to simply do away with the traditional SMS.

Moreover, as Vidya S. Nath,Director, Digital Media, Global Innovation Center (GIC), Frost & Sullivan observes that as the majority of users on WhatsApp are young and Facebook has been eager to tap into this area, where it was losing out on, this move will help Facebook tap youngsters who were abstaining from the mainstream social networks and shifting to social messaging.

Asia a tough nut to crack?

While India is certainly the safest bet for facebook and the duo is expected to accelerate focus on this market in the coming months, for the rest of the Asian market and especially in China, Facebook may still have to rethink its strategies. A WSJ report says, in Asia, even more than on Facebook’s home turf, the big, growing social-media market is on mobile phones. The companies need to lure users away from three popular apps in the region: Line in Japan, WeChat in China and Kakao in South Korea, which may seem challenging in the near future. While WhatsApp is popular in some Asian markets—such as Hong Kong and Singapore—Line, WeChat and Kakao have expanded in the region over the past two years, creating a tough environment.

In the China market especially, given WeChat’s dominance, analysts believe it would be difficult for WhatsApp to make a dent there. on a positive note however, the WSJ report states while in China Facebook is largely unavailable, WhatsApp isn’t blocked. This can offer a potential new channel for Facebook to compete in the world’s largest smartphone market.

On the whole however, the acquisition is a big leap for the emerging markets of the world, and especially in India. As Praveen Bhadada, Director, Market Expansion, Zinnov Management Consulting notes that the acquisition of WhatsApp by Facebook has a strategic significance for the fast evolving mobile world. It is an endorsement in many ways that the future of communication lies in mobile. Facebook is paying a huge premium for this purchase given the young and internet savvy demography that it would gain access to. It will be interesting to see how Facebook defines the monetization models for the future WhatsApp across emerging markets and geographies.