Facebook’s decision to acquire popular instant messaging service WhatsApp has been described by South African analysts as a smart move but also one that could be bad for competition.
New York Stock Exchange listed social networking firm Facebook plans to purchase messaging startup WhatsApp for an estimated $19 billion.
According to Reuters, 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”.
"No one in the history of the world has ever done something like this," Facebook chief executive officer Mark Zuckerberg said.
The deal, which has been described as Facebook’s attempt to expand its reach among users of mobile devices, is planned to see Facebook take over operations of the messaging app.
Facebook, which recently celebrated its tenth birthday, 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.
A research study released by South African technology market research firm World Wide Worx and social media measurement company Fuseware last year revealed that Facebook had 9.4 million active users in South Africa.
There are no public statistics available regarding the number of WhatsApp users in Africa; however, the same research released by World Wide Worx and Fuseware said that the instant messaging application has notched up 10 million users in South Africa. Meanwhile, WhatsApp is reported to have 450 million monthly users worldwide, adding an additional one million to that figure daily.
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,” he said.
Goldstuck added that the deal is set to allow Facebook to stamp its dominance in the instant messaging and social network space.
Mike Wronski, managing director of Fuseware in South Africa, explained how WhatsApp is set to boost Facebook’s business and entrench its dominance
“This is Facebook’s largest ever acquisition by far, and shows how critically they value mobile growth and engagement,” Wronski 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,” he explained.
Wronski added, “Whatsapp will be able to complement Facebook’s existing chat services to provide greater value to its community.”
Could US antitrust laws scupper the deal?
According to Goldstuck, there is a possibility that the Facebook deal could be blocked by US Antitrust Authorities.
The US Antitrust Authorities are regulators that determine federal and state government laws, which look over the conduct and organisation of business corporations.
The antitrust regulators promote fair competition for the benefit of consumers, and have the power to restrict mergers and acquisitions of organisations.
However, Harry First, a professor at New York University School of Law, said in an interview with Bloomberg that it was unlikely that the deal could cause issues with antitrust authorities.
“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?” First added.
Seth Bloom, founder of Bloom Strategic Counsel in Washington and a former general counsel of the US senate Antitrust subcommittee told Bloomberg that Antitrust regulators could study the extent of competition between WhatsApp’s service and Facebook’s own application, 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.”
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