Facebook Inc chief executive officer Mark Zuckerberg will take a victory lap at the world's largest mobile technology conference in Barcelona on Monday, after beating out Google Inc in a $19 billion acquisition of free messaging service WhatsApp. But he is facing a new arduous race on the horizon.
Just 18 months after appearing at risk of getting crushed by the swelling mobile wave, the no. 1 social network is riding high. It gets a huge chunk of ad revenue on world-wide users of smartphones and tablets, from virtually nothing several years ago.
Now, Zuckerberg's purchase of WhatsApp - while raising eyebrows with the hefty price paid for a company that boasts 450 million users but has little revenue - places Facebook at the heart of smartphone communications.
It's a twist that is sure to have some telecom bosses in Barcelona gritting their teeth. WhatsApp and its fellow messaging apps, including China's WeChat and Israel's Viber, have punched a hole in operators' sales by offering a free alternative to text messages, a $120 billion market for operators. Research group Ovum said telcos lost $32 billion in text revenue last year and will lose $54 billion by 2016.
Zuckerberg and WhatsApp co-founder Jan Koum are likely to cast themselves as partners not foes of the industry in their appearances at Mobile World Congress on Monday.
Zuckerberg's keynote at 17:00 GMT is expected to focus on Facebook's efforts to make wireless Internet access easier and more affordable in developing countries.
Surprise deal
Facebook's purchase of WhatsApp is its latest move to transform a platform and company born on the PC into a full-fledged network for a mobile generation. Zuckerberg's progress so far on mobile has positioned the company to take advantage of the fast-growing markets. And it has helped boost Facebook's stock roughly 150 per cent since July.
But with a new crop of smartphone applications threatening to eat into Facebook's audience, worrying signs of waning interest amongst younger users - which the WhatsApp acquisition may help address - and a tech landscape evolving more rapidly than ever before, Facebook can't afford to fall behind again.
That is critical for Facebook as it courts the "next 5 billion" Internet users, many of whom live in places like India and Africa and who are likely to first experience the Internet on a mobile rather than a PC.
"If Facebook is not first in line when those people are firing up their devices, it stands a chance of never connecting with those folks, because there are so many alternatives," said Brian Blau, an analyst at research firm Gartner.
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