Facebook's Mark Zuckerberg: WhatsApp, Internet.org aimed at long-term growth, not short-term gain [San Jose Mercury News :: ]
(San Jose Mercury News (CA) Via Acquire Media NewsEdge) Feb. 24--Arguing for long-term growth over short-term gain, Facebook CEO Mark Zuckerberg said Monday that his company's $19 billion deal to buy messaging service WhatsApp fits into a larger goal of connecting more people around the world to the Internet.
WhatsApp may ultimately be worth more than the eye-popping price Facebook agreed to pay last week, based on the revenue that other messaging services are earning, Zuckerberg insisted during a talk at the Mobile World Congress in Barcelona, Spain.
But he added that the acquisition means WhatsApp co-founder Jan Koum can concentrate on expanding the service's international user base -- now about 450 million and growing fast -- rather than worry about how to make money from the operation.
"They can focus for the next five years or so purely on connecting people," Zuckerberg said, in a talk that was webcast from the industry conference. Without the deal, he added, Koum would face pressure to "focus on building out the business model."
Facebook's CEO also announced several new initiatives by an industry alliance called Internet.org, which he formed last year to work on improving Internet access in underserved regions. A new study commissioned by Facebook found that expanding Internet access in developing countries would increase economic productivity and create millions of new jobs.
In one initiative, Facebook is working with Nokia, Airtel and the Rwandan government to help students get online educational materials by using low-cost smartphones. In a separate effort, Zuckerberg said he's looking for telecommunications partners to help deliver a free or very-low-cost mobile service that includes a stripped-down version of Facebook along with weather forecasts, crop reports or other useful information for residents of rural or undeveloped regions.
The idea is to provide basic service comparable to free 911-calling ability, Zuckerberg said. But one analyst said communications firms may not see much benefit to an idea that appears "Facebook-centric."
"Whether (telecommunications) operators will buy into Facebook's vision remains to be seen," analyst Eden Zoller of the Ovum research firm said in an emailed comment. "The direct monetization prospects for telcos are thin."
Zuckerberg downplayed any near-term benefit for Facebook, saying there is little advertising business in undeveloped regions.
"I think we're probably going to lose money on this for quite a while," he said of Internet.org, but "over time, if we can deliver this, there probably will be some benefit for Facebook" and other companies.
Zuckerberg also said the WhatsApp deal grew out of conversations he and Koum had about providing better Internet service in undeveloped parts of the world. He added that "Jan was excited" about Internet.org and its goals.
Facebook is paying $16 billion in cash and stock for WhatsApp, plus $3 billion in restricted stock for WhatsApp founders and employees who remain over several years. Zuckerberg pledged Monday not to interfere with Koum's stand against utilizing WhatsApp user data for advertising, although that's a key part of Facebook's business model.
Investors seem to like Zuckerberg's thinking: Facebook's stock hit a record high Monday and closed at $70.78, up more than 3 percent for the day.
But when asked if he plans another bid for Snapchat, a rival messaging service that turned down his reported $3 billion offer last year, Zuckerberg said: "After buying a company for $16 billion, you're probably done for a while."
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