Breaking Analysis: Facebook Finally Going Ad-Free with WhatsApp Acquisition?

Facebook is said to be in talks to acquire WhatsApp, a cross-platform mobile messaging app. WhatsApp has been in the news earlier this year to defend themselves from accusations that they’re stealing SMS revenues from mobile operators. WhatsApp insisted that they are benefitting operators by encouraging subscribers to use data plans. Although it’s a paid app, WhatsApp’s key attraction factor is that it’s ad-free. Don’t let the “paid app” part fool you either though; subscribing to WhatsApp certainly won’t break your bank account, as the initial download and first year of use is free, and only $0.99 for each year after.

Another blog post from January 2012 on simpliflying.com about in-flight wi-fi service highlighted WhatsApp’s revenue model by saying that airlines should look to it as an example of how they get their users hooked with the free first year and then charge that minimal fee from the second year on. It drives up membership and revenue by sheer volume alone.

SiliconANGLE Contributing Editor John Casaretto speculated on how having a paid, ad-free service would benefit Facebook, whose current business model of relying on advertising as a revenue source is under constant criticism. Casaretto believes that it would extend touch points with mobile consumers and expand their business model to go beyond advertising. He said, “It would also serve to diffuse the . . . criticisms they’ve had in the past and get more of that positive impact with investors.” Moreover, he said, it’s a global business with many active users and a clear business model that has been very successful.

Casaretto discussed other WhatsApp factors that would be beneficial to Facebook, such as the boost they need (and want) to get into the mobile game, as well as an international reach on its multi-platform capabilities. “I think those are the general things they’re looking at . . . to get to the next billion users.” Casaretto believes Facebook could gain credibility through this move, as they would have to continue to maintain the ad-free space. ┬áSee the entire segment with Kristin Feledy and John Casaretto on the Morning NewsDesk Show.