WhatsApp deal with Facebook may kill Mxit

2014-02-20 14:30
Facebook intends to use messenger application WhatsApp to grow its user base. (Duncan Alfreds, News24)

Facebook intends to use messenger application WhatsApp to grow its user base. (Duncan Alfreds, News24)

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Cape Town - Facebook's acquisition of WhatsApp represents a direct threat to local chat application Mxit, says an analyst.

Facebook announced on Thursday that it had bought WhatsApp for the huge sum of $19bn, including $4bn in cash, as the California-based web titan looks to grow to the next billion users.

WhatsApp has around 450 million active users and the fact that the chat application is growing in emerging markets was probably a determining factor in Facebook's decision.

"WhatsApp's growth potential in emerging markets is much higher that Facebook's because it is already integrated into feature phones and even semi feature phones, and is fast replacing SMS as the messaging option of choice," said Steven Ambrose, Strategy Worx CEO.

WhatsApp has already grown exponentially in SA with a user base of 10 million and Ambrose said that the tie-up with Facebook will make it increasingly hard for companies like WeChat and Mxit.

Young audience

"The acquisition will make it increasingly difficult for platforms like MXit and WeChat, a WhatsApp rival out of TenCent in China (of which Naspers owns over a third), which are working hard to develop market share locally," he said.

At a continental level, smartphones - or even feature phones - are still in the minority and expectations are that as people migrate toward smarter devices, WhatsApp could experience a surge in growth as users avoid the cost of SMS.

"With smartphone penetration sitting at well below five percent in an African context, dumb phones and features phones predominate. As people become connected, the move to WhatsApp is a natural one as an affordable alternative to SMS," Ambrose said though he conceded that internet data was still a cost barrier in developing markets.

WhatsApp is a particularly good fit for Facebook because the former's audience is young and growing. They also spend a significant amount of time engaged with the application.

As teens in the US turn to networks such as Twitter, WhatsApp may give Facebook a new energised audience, with a focus on mobile devices.

Facebook has said that the WhatsApp will remain independent, but Ambrose thinks that there will be some integration in the platforms.

"While Facebook has initially said that Facebook Messenger and WhatsApp will remain separate, Strategy Worx expects Facebook to begin to integrate social media functionality into WhatsApp, allowing users to begin to share content as they would on Facebook, changing WhatsApp's pure play instant messaging offering into an affordable social communication platform for the developing market."

SA adoption

With around 12 million smartphones and 20 million feature phones in SA, WhatsApp is poised to grow its user base exponentially.

Ambrose added that the Facebook muscle behind cross-platform WhatsApp will see greater adoption in SA, potentially closing the window on Mxit, WeChat and BBM.

"It will be very difficult for other instant messaging and social media platforms to combat this new partnership, ensuring Facebook’s dominance for years to come."


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