The $19 billion app and the future of the middle class

WhatsAppWhatsApp, the international texting service, has been purchased by Facebook for a whopping $19 billion. (Credit: Hussain)

WhatsApp, the international texting service, has been purchased by Facebook for a whopping $19 billion. (Credit: Hussain)

Big news is “appening” in the Tech World this week. Samsung released the Galaxy S5 and a large security hole was found in Apple’s software. However, Facebook’s $19 billion acquisition of WhatsApp is by far the most intriguing. WhatsApp allows users to send unlimited text messages to people all around the world for only 99 cents per year. The main reason for this purchase is to address Facebook’s stagnant user growth. WhatsApp has a huge worldwide user base that is growing daily with over 330 million daily users. By integrating Facebook messenger with WhatsApp, the user base will be enormous. Zuckerberg was interested in the WhatsApp infrastructure and it is speculated that mobile voice calls will be added to the new WhatsApp.
Facebook’s decision to buy WhatsApp is somewhat controversial in the corporate world. Even Facebook CEO Mark Zuckerberg said in an interview, “It’s hard to make the case today [that it’s worth $19 billion] because they have so little revenue compared to that number.” Most analysts agree that $19 billion is overpriced. Zuckerberg does not really seem to care what analysts think, however. He thinks the potential value of user growth is worth more than $19 billion, and Facebook can certainly afford it.

There are two main points worth mentioning about this purchase. I believe that this acquisition demonstrates the innovation that can spawn from a market that isn’t overly regulated. Now, regulations certainly have their time and place and I am not advocating deregulation in all cases. No one wants unsafe medical devices or pharmaceuticals, or energy plants that could wind up like Fukushima. However, a company of 2 developers and 55 employees just made $19 billion, and this success story is a result partially because the technology industry is not overburdened by regulation. It is actually the least-regulated industry in the U.S. and it has been the most innovative.

The other takeaway from the WhatsApp’s purchase is jobs. It is becoming a concern that companies making the most profit have so few employees. With an ever-increasing population, where will the future jobs be for Middle America? For starters, I believe there is so much opportunity for growth in the public sector. Our infrastructure is falling apart that hasn’t been updated in many cases since before the Eisenhower years. In addition, green energy jobs can be expanded in order to keep up with other developed nations who have surpassed us in alternative energy development. Also, more manufacturing has to happen in the United States to keep up with the technology advances.

It’s a big deal that Facebook bought WhatsApp. It purchased a company for 19 billion dollars with barely any revenue. This deal has raised a lot of eyebrows, and I have no doubt Zuckerberg has a definitive plan to raise a lot of revenue.