For $19 billion WhatsApp-Facebook messenger is still shut out of Asia.
News broke Thursday that Facebook paid a staggering $19 billion for WhatsApp, the popular OS agnostic chat app. Much to the chagrin of telecoms losing lucrative SMS revenue, chat apps are on the rise as smartphone toting users prefer the flexibility of a chat app to the banality of an SMS message.
Looking at charts comparing chat app market share, Facebook’s reason for buying WhatsApp becomes clear: in the west the two apps are neck-and-neck in market share. In the United States, depending on the data you look at, Facebook messenger generally leads with an uncomfortably small margin. In Europe WhatsApp reigns supreme, with market penetration as high as 84 percent in countries such as Germany.
But in Asia, neither Facebook messenger nor WhatApp has any considerable market share. Overwhelmingly chatters prefer domestic chat apps.
In China, Tencent’s WeChat has grown at a blistering pace growing to nearly 400 million users. This has been a nice cash cow for the company, bringing in $1.1 billion in revenue and pushing TenCent’s valuation past $100 billion. Unlike WhatsApp, chat apps in Asia have a solid revenue model put in place. Users have proven quarter-after-quarter that they will buy stickers, games and other virtual merchandise. According to estimates published in The Economist, WeChat’s average revenue per user is $7 per user. Also keep in mind that Tencent has the home field advantage in China with WeChat, as Facebook is blocked entirely by the great firewall. If WhatsApp is merged into Facebook it may lose what little marketshare it has in the harmonious kingdom.
But Tencent hasn’t had the same success abroad with WeChat that it’s had domestically; Chat app popularity tends to be drawn along geo-political lines. In Japan friendly Taiwan, Japan’s LINE dominates like it does in its home country. In Korea, Kakotalk from local giant Naver has a regional monopoly. Then there’s the developing world: Blackberry’s BBM still is the most popular app in countries like South Africa, Nigeria, Indonesia, Argentina, Honduras, and United Arab Emirates. BBM has only solidified its hold one it became OS agnostic, allowing a generation of low-cost Android phones access to the app.
$19 billion is a lot of money for a app with such large gaps in its market penetration. Facebook made a gambit to solidify its largely rich world chat app market share, but that money could have been better spent elsewhere in the fast growing chat markets of Asia.