What's Now & What's Next

Top of Mind

What's Now & What's Next

By Paula Bernier, Executive Editor, TMC  |  April 02, 2014

Facebook’s (News - Alert) acquisition of WhatsApp was the big news circulating as I was putting this issue of INTERNET TELEPHONY to bed.

In case you’re not already aware (and even if you weren’t before the Facebook deal, you probably are now), WhatsApp offers an over-the-top mobile messaging app that people can use to avoid cellco SMS charges. Facebook has reportedly been interested in the company for some time, and finally was able to reel it in for the generous offer of $19 billion (yes, billion).

That’s interesting not only because it represents the largest ever purchase of a company backed by venture capital (Sequoia Capital (News - Alert), which invested $60 million) and because it involves Facebook, but also because most of us don’t know what kind of revenues WhatsApp (which is just five years old and has just 55 employees) generates. The perceived value of WhatsApp, according to most reports, is in its large user base – 450 million monthly users, which is nearly twice that of Twitter (News - Alert). 

Now the trick will be for Facebook to figure out how to monetize the WhatsApp service. And at $19 million, Facebook will have a lot of monetizing to do before this deal sees a real payoff.

Getting its hands on the phone numbers WhatsApp has captured is also of value, as is WhatsApp’s strength in Asia and the Middle East, according to Eden Zoller, principal analyst of consumer telecoms at Ovum (News - Alert), which forecasts that social messaging volumes will reach 69 trillion and subscribers will grow to 1.8 billion by the end of this year.

“The access to phone numbers now bridges the offline and online worlds of Facebook users,” says Zoller. “WhatsApp will also enhance Facebook’s mobile strategy and make the service grow faster and be stickier with mobile first users. Facebook will in turn provide WhatsApp with the funds and resources it needs to develop the service and become an even stronger competitor in an increasingly over crowded messaging market.”

Over crowded indeed. As this issue’s cover story discusses, the telephone companies are scrambling as they see over-the-top services such as Skype and WhatsApp eating into their revenues.

The move by Facebook to acquire, and possibly strengthen, WhatsApp, and Microsoft’s previous move to snap up Skype, further illustrate the value – and the threat – of over-the-top players and offerings. And all of the above only strengthens the argument that telcos need to move fast to figure out how to respond to that threat both by providing their own over-the-top offerings and by retooling their networks to be more flexible so they can turn on a dime and quickly introduce and tweak new service offerings as needed.

We’ll discuss all of the above at Software Telco Congress – The NFV Event, which INTERNET TELEPHONY parent company TMC will be holding Aug. 11-14 at The Rio – Las Vegas. For more information, visit www.softwaretelco.com/conference/.

As I mentioned in this column a couple months ago, at the moment telcos appear to be more interested in moving to agile networks based on network functions virtualization and software-defined networking technologies primarily in an effort to lower their operational expenses. In fact, Craig Farrell, vice president and CTO of the global telecom industry practice at IBM, said just that at our last Software Telco Congress.

What telcos should, and to some extend already are, thinking about and moving toward is a completely new way of looking at networking in an effort to be more responsive to customers and the market so they can survive and thrive in the age of the over-the-top service and Internet time.

As Phil Harvey, director of corporate communications at Metaswitch, aptly explained during a panel at the recent ITEXPO event: “We’re asking service providers to fundamentally change some part of who they are and embrace a new approach to product development and service development.”

But, as the move by AT&T, BT (News - Alert) Group, Deutsche Telekom, Orange, Telecom Italia, Telefonica and Verizon to create the ETSI Network Functions Virtualization Industry Specification Group back in 2012 demonstrates, it’s not just telecom vendors doing the asking. The telcos themselves seem to be doing some real soul searching – and, more importantly, taking action – in an effort to embrace what’s now and what’s next for the connected consumer.

Edited by Stefania Viscusi