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Europe Clears Facebook’s Acquisition of WhatsApp

October 3, 2014 - Written By David Steele

Facebook is the world’s most popular social network and over 500 million users use the service every day. WhatsApp is one of the most popular Internet messaging services and has more than 600 million monthly users. It seems only natural that the two businesses should get together? That depends on your perspective but now the European Union has cleared Facebook’s $19 billion purchase of WhatsApp. This is Facebook’s largest deal in its ten year history and gives the business an even stronger foothold in the mobile messaging market; and let’s not forget WhatsApp’s plans to include voice calling functionality into the application. The European Commission has said that Facebook’s acquisition of WhatsApp won’t hurt competition and I am inclined to agree.

The reason why I don’t believe WhatsApp’s voice calling functionality is competition against the mobile networks is because voice calling has peaked across much of the world. It’s considerably more expensive to establish a voice call compared with a data network and the current modern standard 4G network, LTE (Long Term Evolution), cannot handle voice calls as older generation networks do. Instead, LTE is much more efficient at handling data connections and is able to handle more subscribers at a higher speed compared with a 3G mast. The carriers are investing in VoIP, Voice-over-IP or voice over a data network, which will include LTE, 3G and WiFi networks. This is all a part of the Internet of Things (IoT, see here). The carriers are working on building out their data capacity and investing in technologies to use this for handling voice calls, but Facebook’s service will likely be a Facebook to Facebook (perhaps via WhatsApp) connection.

Instead, I see Facebook’s acquisition of WhatsApp as making them more a competitor for Google, which already has Google+ and Hangouts. Facebook, like Google, is in the advertising business and both companies have talked about bringing the Internet and communications to the developed world. Facebook has largely reached saturation in the developed markets but there are billions of people in the developed market who don’t have accounts. WhatsApp is reaching these markets and Facebook wants to follow.