WhatsApp: Silly Money or New Front in the Platform Wars?
It’s been a few days since Facebook announced to the world it had bought WhatsApp. And Rakuten bought Viber. You are forgiven if only one of those names rings a bell. so while I’m at it, let me throw in a few more: WeChat, LINE, KakaoTalk. Nimbuzz. Mig33. Fring. Telegram. Tango.
OK, that’s enough names. But while I’m at it I’ll throw out a prediction: You’re going to hear a lot more of these messaging services in the years to come. That’s because we’re entering a new phase of what we might pompously call the platform wars. One where those with the biggest network win.
It sounds arcane and complicated but it’s not really, if we strip it down to the fundamentals. Phones were always about the network effect. The first phone, for example, was pretty useless, like the first subway station. But the more phones were added to the network, the more useful the network became, and the more worthwhile it was to get a phone and plug it in.
Networks are about communicating. When SMS came along folk loved it because it offered a less intrusive option for the mobile phone; you didn’t have to talk to people to communicate with them.
Messaging applications like WhatsApp are a return to this simplicity. And of course, it’s cheap. So it’s not surprising that more than 450 million people use it.
And this is the thing. Facebook and Rakuten, the Japanese ecommerce company that bought a smaller version of WhatsApp called Viber, want to get as close to you, the mobile user, as they can. They want to get you to buy stuff, or share stuff, or see stuff because that’s how their business models work.
In that sense it’s simple. But under the hood there’s a larger shift at work in the layout of the engine. In the old days, to get close to the user you built a browser. Remember all those wars over the default browser in Windows?
That’s all old hat now. The conventional wisdom is that on mobile phones, where all the action is, the chokepoint is the operating system. That’s the software that the device runs, and comes with. That means Apple, with their iOS, and Google, with their Android, are in pole position. If you want to do something, like sell an app, you have to go through their app store. Upset them and you’re out. Oh, and they get a cut of anything you make on their device.
Only hang on a minute.
What happens if the choke point, the place where the rubber hits the user, as it were, wasn’t the app store but, say, a messaging app? Or if you wanted to order a taxi? Or buy insurance?
This is what is happening already, in China, South Korea and Japan. And it’s big, because it threatens to undermine a lot of what these big players, not just Apple and Google, but phone makers like Samsung, and telephone operators, and everyone in the mobile game, has been trying to do.
In short, if you can insert yourself in the what folk call the value chain so all the user sees is you, you’re good to go. And that’s what’s happening with the likes of WeChat, KakaoTalk and Line.
You may not have heard of these guys, and you may not again. But if you think them about in that way you’ll have a clearer idea about why Facebook splashed out $19 billion on their Western equivalent WhatsApp, and Rakuten $900 million on Viber.
Big money. But when you’re elbowing big names aside to get to be the first and only thing the nearly 7 billion mobile phone users in the world interact with, maybe it doesn’t look like silly money.
This is a piece I wrote and recorded for the BBC World Service’s Business Daily program riffing off the Facebook and Rakuten purchases. Podcast here.