How Will Facebook’s WhatsApp Purchase Affect Africa?

How Will Facebook’s WhatsApp Purchase Affect Africa?

Facebook’s announcement that it is buying the mobile instant-messaging company WhatsApp for about $16 billion has everything to do with growing the social network’s global reach internationally, including Africa, WashingtonPost reports.

How will Facebook’s WhatsApp purchase affect Africa? South African analysts say it’s a smart move that’s good for Facebook but could be bad for competition, according to ITWebAfrica.

The most popular social network in the world, Facebook is trying to play catch up in the world of mobile messaging apps, where users in South Africa and countries such as Brazil, India, and Indonesia increasingly use mobile phones to exchange messages, photos and videos.

Facebook has a messaging service of its own — Facebook Messenger — popular in the U.S., but not so much in countries such as South Africa, where there is intense competition between firms with names unfamiliar to many Americans.

More than 450 million people worldwide use WhatsApp every month. South Africa, population 51 million, has more WhatsApp users (10 million) than Facebook users (9.4 million), according to ITWebAfrica.

Facebook said it had 1.23 billion monthly active users worldwide at the end of 2013.
In Africa, Facebook had more than 50 million users as of March 2013, according to research firm Socialbakers.

Much of Facebook’s strategy hinges on growing internationally, WashingtonPost reports. In 2012 Facebook earned more revenue from outside the U.S. than inside. Domestic marketing and development accounted for 46 percent of the company’s revenue in 2012, compared to 51 percent in 2011.

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“The change is due to a faster growth rate of international users and to the expansion of international sales offices and payment methods,” the company said in its 2012 annual filing.

There are no public statistics available for the number of WhatsApp users in Africa, according to ITWebAfrica. However South African technology market research firm World Wide Worx and social media measurement company Fuseware said that the instant messaging app has 10 million users in South Africa.

Reuters reported that the cash and stock deal involves $4 billion in cash, $12 billion in
stock and $3 billion in restricted stock that vests over several years.

But South African technology analyst and managing director of World Wide Worx, Arthur
Goldstuck, told ITWeb Africa that the deal is positive for Facebook but bad for competition.

“This is a highly competitive move by Facebook as it places so much control in the hands of
one player,” Goldstuck said.

The deal will let Facebook dominate the instant messaging and social network space, Goldstuck said.

“This is Facebook’s largest ever acquisition by far, and shows how critically they value
mobile growth and engagement,” Mike Wronski, managing director of Fuseware in South Africa, told ITWeb Africa. “This move makes Facebook one of the world’s most dominant mobile players, and Google, Apple and Microsoft need to step up their game quickly as the next couple of billion people become connected through mobile in the next few years.”

Whatsapp will complement Facebook’s existing chat services to provide greater value to its community, Wronski said.

But U.S. antitrust laws could block the deal. Antitrust authorities regulate federal and state government laws, overseeing the conduct and organisation of business corporations. They promote fair competition to benefit of consumers, and have the power to restrict mergers and acquisitions.

Harry First, a professor at New York University School of Law, told Bloomberg it was unlikely the deal could antitrust issues, ITWebAfrica reports.

“It seems like a stretch to me to find some kind of competition issues,” he told Bloomberg.
“This is not the only message-sharing app for free. How hard is it to start up another one?”

Seth Bloom, founder of Bloom Strategic Counsel in Washington, D.C. and former general counsel of the U.S. Senate Antitrust Subcommittee told Bloomberg antitrust regulators may study the extent of competition between WhatsApp’s service and Facebook’s own app, Facebook Messenger, and whether the deal may give Facebook undue control of the messaging market.

“The thing about this market is there is rapid technological change and frequent new entry,” Bloom said. “It’s hard to say anybody has a durable market share.”