In the span of three months, Facebook, the massive social media giant, offered more than $20 billion (billion with a 'b') for a pair of messaging apps. The first was SnapChat, the photo message sharing app your kids love and you probably know nothing about, which turned down $3 billion from Zuckerberg, Inc. back in November. The second was this week, when Whatsapp, an app that offers an alternative to traditional text messaging, was offered $19 billion by The Book. It wisely accepted.
I'm sure, if you have made it this far, you ware wondering, "Who or what the hell is a Whatsapp? Why is it worth so much? And what idiot turned down $3 billion for an app?" All fair questions, but the very questions themselves are probably a pretty good indicator of your age and, perhaps, your geography.
Let's start with what.
Both apps are designed to send messages. In the case of SnapChat, it allows users to send picture and video messages. The unique feature of SnapChat is that whatever message is sent is automatically erased within a few seconds of being seen by the person who received it.
This has made it a popular way to send provocative images and videos, particularly by kids. SnapChat has largely replaced Facebook, Twitter and YouTube as the social media option of choice for teens.
Whatsapp is more like a replacement for standard text messaging. This might not seem like a big deal for most people, but it can have a significant impact on kids who send so many messages, it bumps up against limits set by providers. It is also beneficial for those who want to send texts but have an iPod or similar device instead of a phone. Finally, it is substantially cheaper for those who want to send text messages from one country to another, especially while traveling.
Now, the why.
First off, technology is primarily built for young people or for business. This is because the average 40 or 50-something isn't terribly interested in the latest phone or gadget. Kids are and businesses have to be. Second, while we tend to see things through the myopic lens of Americans, there are countries around the world where things like SMS messages are difficult or expensive to send. Texting is extraordinarily popular in places like China, which has nearly 10 times as many people as the U.S.
Lastly, the how much?
Forbes has a good breakdown on the reasons why Whatsapp is worth $19 billion (most of which apply to SnapChat's $3 billion offer as well), but here are the biggest reasons.
In the world of social media today, it is about growth and engagement. How big your audience is and how frequently they use your technology is the key to generating the massive amounts of revenue services like Facebook have made. In the case of Facebook specifically, they are the most widely used social media platform in the world, but kids are abandoning them in droves, partially because of the lure of new tech, but also because they don't want to hang out in a place where their parents also hang. For them, it's like going to a party with your friends and everyone's mother and father are standing around too.
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In order to stem the tide of those losses, Facebook has to expand and find new ways to engage a younger audience.
Speaking of engagement, the ability to draw in younger users is also the way to attract advertisers. As demographics trend older, ad rates go down because it is harder to sell to someone in his 30s than it is a teen. Additionally, being able to expand your reach into a global marketplace is clearly on top of Facebook's to-do list as well. This helps to accomplish that.
Don't feel too bad if you are left out of the dramatic changes in the tech world. It is difficult for anyone to stay abreast of every bit of new technology. Plus, there are already plenty of industries that largely ignore you because you are older and others still that hone in directly on your age group.
Sure, Viagra and luxury cars might seem boring, but do you really want to try and keep up with apps and social media? You barely know how to program your DVR if you even know what that is.