Google and WhatsApp – Admission of weakness

Google’s interest in WhatsApp is a sign of weakness.  

• WhatsApp has denied that it is in talks with Google with respect to being acquired but that does not mean that discussions have not taken place.
• Quite to the contrary, I suspect that Google has made a play for the company but been rebuffed due to the price being too low.
• WhatsApp revenues are still relatively low but the fact that Google has been banging on the door is a sign of its strategic importance.
• Google already has an instant messaging system as well as a voice and video communication and collaboration system.
• The key difference is that WhatApp has the ability to find which of your contacts also uses WhatsApp on the basis of their phone number.
• This makes adding contacts easy and painless, which I suspect why WhatsApp has become one of the major players in the instant messaging space.
• Google + already has 500m users and so the only reason why I can see that Google would want to acquire WhatsApp would be if its IM system is suffering from low usage on mobile devices.
• Google has great coverage of Digital Life from which I believe that it makes a very healthy return.
• Hence, its interest in WhatsApp is a sign of weakness.
• In that instance, I suspect that an offer of 10x revenues was badly received, effectively ending negotiations.
• WhatsApp has nailed it in its chosen niche but this remains a relatively small part of the time that users spend on their smartphones.
• In the rest of Digital Life, in has nothing meaning that its long term growth and its viability is open to question.
• Hence, I suspect that WhatsApp is open to being acquired just not at a derisory $1bn.