Conventional wisdom seems to be seeing that Facebook paid too much to acquire WhatsApp, a mobile texting startup that is enjoying meteoric success in developing countries. At $19 billion, the price may exceed the GNP of some of those countries, so I see the point if you think that is what should be measured.
But I don't think Mark Zuckerberg is much os a conventional thinker. If he was, then Facebook would not have transcended from a dating site for Ivy League fraternity boys into the world's largest social network. I am not Zuckerberg's greatest fan, but his ability to choose roads not taken and get to important goals before anyone else has been pretty impressive so far.
I personally, think this is a brilliant-but risky-deal, one that give Facebook a clear shot of becoming the most successful of all Internet companies in the 21st century, but I am looking through an unconventional prism. As Katie Paine, a social measurement expert has taught me, companies become what they measure.
Brandon Wirtz, CTO at Stremor.com in Scottsdale and I are Facebook friends. We have talked there often, but have never met in real life. I like his ideas and perspective over all, but last week we banged heads over this acquisition. He hates the deal, but I love it. He is looking at the numbers which don't add up; I am looking at the story, which is exciting whether Facebook soars or plummets because of this buy.
While I see this deal as brilliant, Wirtz sees it as boneheaded. He sees evidence that this deal must be bad because Facebook stock immediately ratcheted down upon its announcement. I don't find much credibility in the knee-jerking, wallet-slapping reactions on Wall Street. There was a time when the place was about what a company might achieve in a few hours. Now it seems to me to be more like offtrack betting that the stock price will open higher tomorrow morning than it closed last night.
Mark Zuckerberg has already demonstrated his respect for Wall Street by showing up in a hoody when he first visited the folks in Gucci suits and Ferragamo shoes before Facebook's IPO. The stock suffered from that play but not for very long. I think he deals with Wall Street the same way most of us deal with the IRS-as an unpleasant requirement.
Wall Street sees Zuckerberg as quixotic. Zuckerberg, in forging the strategy for the world's most successful social network complies with them, but doesn't play to them. And he is anything but quixotic. His goals are clearly stated and have been often repeated: He wants Facebook to dominate the world. For several years he closed staff meetings with employees all shouting 'Dominate!' Once the company went public he complied with legal advice that this was an unwise ritual.
For the last few years, he has modified his stated goal: Facebook will connect all people in the world.
I first noticed him saying that in his poorly received address to Wall Street, way back in 2013. He repeated it, when Facebook announced last October that it would spend $200 million to acquire Onavo, an Israeli company that trims mobile phone costs for people in developing and underdeveloped countries, a move that was scorned on Wall Street for a few days until investors forgot about it.
Zuckerberg's moves, it seems to me, are much more carefully orchestrated than most people realize. Facebook has a firm position in the first world where it must compete-often fiercely-with several other capable and and agile Internet companies. The real question is where are all these companies going in the next five, ten and 20 years. And what is the shortest-least travelled-route to getting there?
Hs competitors follow conventional wisdom and play to the investment community in the way that most public companies feel compelled to play. Corporate strategies very often end up about making quarterly results. Zuckerberg give every possible indication that he is looking elsewhere and that elsewhere is in developing nations often overlooked or disdained by the tech elite community.
That hoody didn't play well to the house on Wall Street but the perception might have been quite different on the streets of Senegal, Brazil or India where ancient feature phones are shared by entire families and iPhones and Androids still have a few years before they find their way into the lives and budgets everyday people in developing lands.
My friend Brandon Wirtz is dismissive of a deal that has Facebook paying $80 per WhatsApp customer, when many of those customers don't make $80 in a month. That's good conventional analysis of good conventional numbers, but I doubt that is where Facebook is looking. In WhatsApp they see a bridge into the 21 st century when the world inches toward the flatness that Thomas Friedman wrote about.
Facebook is taking a long view, that Google, Apple, Amazon, Microsoft, Yahoo! and other may not yet be seeing. Most of those companies are doing quite well with available low-hanging fruits of the First World orchards. Facebook seems to be forging out into the jungles and deserts that are yet unexplored by rivals.
Wirtz sees what these other companies sees and what Wall Street sees and there is nothing wrong with that perspective. There is a great deal of money to be made in marketing to the sort of people who read Forbes; who drive upscale cars and are willing to pay a few hundred dollars for a tablet computer, and only grumble slightly at the price of our data plans.
But sooner or later, you reach a point of saturation where all pack members end up selling the same goods and services and the only way to compete is on price. This is the conventional thinker's dilemma. If you keep doing what you have always done, you end up trying to pilfer your competitor's customers because there doesn't seem like anywhere else you can go.
The WhatsApp acquisition shows Facebook's determination to follow the road not yet paved. It is a bold move, filled with peril along the way. But that's the right course if you measure the number of potential users in the workd rather than the cost of acquiring each user and the potential for selling ads to each user today.
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