Facebook’s $19 billion deal to buy mobile messaging company WhatsApp raised more than eyebrows. Valuations in the mobile messaging market have increased, and a bright spotlight has been shone upon the companies competing in it. Investors now try to work out where the next multi-billion dollar messaging app will come from and rivalry in the sector has never been more fierce. Here’s where WhatsApp’s competitors stand.
Snapchat may regret turning down Facebook’s $3 billion
Approx. number of monthly active users: undisclosed
Estimated value: $4 billion (reported amount offered by Google)
Facebook offered to buy Snapchat for $3 billion last year, and its investors could yet rue its decision to reject the social media titan’s advances. There is little chance of a return offer after the WhatsApp acquisition, and Snapchat’s founder Evan Spiegel must now produce results to back up the show of confidence in his company. Snapchat’s messaging service differs from the likes of WhatsApp as messages sent from one user to another are temporary, meaning they disappear within a few seconds of being opened. Facebook’s Mark Zuckerberg is clearly a fan of this technology, as he attempted, and failed, to launch a copycat version of Snapchat called Poke. Snapchat recently hired Instagram’s Emily White as COO and launched Snapchat Stories, a feature which puts the company more in competition with the likes of Facebook and Instagram. These moves provide proof Snapchat has the ability to grow and develop on its own without being bought. But the company may yet be acquired. Google and Tencent, the creator of WeChat, still have their eye on the messaging app, according to reports. Tencent is already an investor in Snapchat, according to unconfirmed reports. Other confirmed investors include Lightspeed Venture Partners, Benchmark, SV Angel, Institutional Venture Partners, General Catalyst Partners and Coatue Management. Google tried to buy Snapchat before and reportedly missed out on WhatsApp itself. Snapchat should expect another acquisition attempt from Mountain View soon.
WeChat unlikely to be threatened
Approx. number of monthly active users: 272 million
Estimated value: $30 billion/$95 per user (Barclays)
Tencent’s WeChat is one of the giants of the Asian mobile messaging market, and dominates China in particular. The mobile messaging platform, which recently incorporated mobile payment services, attracts more than 272 million monthly active users. WhatsApp boasts more monthly users and now has the backing of Facebook, but WeChat should not feel under threat. WhatsApp’s major markets are in the West, namely Europe, the U.S. and emerging markets such as Brazil and, further to the East, India.
WeChat has until now targeted eastern markets. But the Chinese application now sets its sights on expansion into some of the same regions WhatsApp performs well in, and has a strong chance of succeeding in them. The same cannot be said of WhatsApp in China. The major difference between the two messaging services is that WeChat offers much more. WhatsApp prides itself on a clean, ad-free platform, but doesn’t offer services such as shopping, gaming and payments. WeChat does. For this reason, Nomura estimates WeChat’s average revenue per user is $7, compared to WhatsApp’s average revenue of $1.
BlackBerry Messenger gets valuation boost
Approx number of monthly active users: 80 million
Estimated worth: $800m/$10 per user
BlackBerry shares jumped as much as 9 percent on Wednesday after news of Facebook’s WhatsApp deal broke. The main reason? Investors think the company, and its BlackBerry Messenger app in particular, is undervalued. BlackBerry Messenger (BBM) was one of the first mobile messaging application successes, but BlackBerry’s decision to keep the application chained to its own phones, which have dipped severely in popularity, has hurt the messaging service. However, in October last year Blackberry finally unleashed BBM onto other devices, and added over 20 million users in its first week. As of last year, the platform had more than 80 million monthly active users. Analysts have rushed to alter their valuations of BBM. On Tuesday, Raymond James analyst Steven Li wrote a note to clients putting the value of BBM at $240 million, or $3 per user. This is compared to Facebook’s valuation of WhatsApp at around $42 per user. TD Securities analyst Scott Penner reacted to the news of the Facebook’s acquisition by raising his valuation of BBM from $400 million to $800 million, or $10 a user. The WhatsApp deal may well have breathed new life, and dollars, into BlackBerry and its mobile messenger service.
A Line IPO could be well timed
Approx. number of monthly active users: undisclosed (300 million users registered)
Estimated value: $8 billion – $10 billion (reported in October)
Line differs from WhatsApp by offering calls as well as messages on its platform. The Japanese company has expanded rapidly from 10 million users in December 2011 to over 300 million currently. The application is available across almost any device and operating system. It also enjoys considerable success outside of Japan – 85 percent of its users come from other countries, mostly in Asia. The application offers a ‘cuteness’ that other apps do not, and sells emoticons and stickers to its users so they can send them to each other. Line was invented in response to a major earthquake in Japan in March 2011. Employees at NHN Japan, an arm of Korean internet content service operator Naver Corporation, developed the app as they had to rely on internet-based communication. In February 2013 Line was spun out into its own company – Line Corporation. According to reports in October last year, Line is set to go public in 2014. Nikkei reported that the messaging app was preparing an IPO valuing the company at between $8 billion and $10 billion. Any IPO in the next few months is sure to attract the attention of investors, after Facebook’s massive valuation of WhatsApp.
Viber deal put in shadow by Facebook
Approx. number of monthly active users: 105 million
Estimated worth: $900 million
Late last week Japanese online retailer Rakuten announced a deal to buy Viber for $900 million. The deal in some ways foreshadowed that of WhatsApp and demonstrated the popularity of mobile messaging apps. Viber was founded in Israel and has since moved its headquarters to Cyprus. The company was founded by four Israelis – Talmon Marco, Igor Megzinik, Sani Maroli and Ofer Smocha. Marco currently serves as the CEO. The app boasts over 100 million active monthly users and is a major competitor in the market, despite its lower valuation. However, investors showed their disapproval of the deal, as Rakuten stock plummeted as much as 14 percent in the first trading session after the announcement. The combination of a Japanese online retailer and a messaging application will put the two directly in competition with WeChat.