Market Overview

Facebook Could Eliminate WhatsApp's $0.99 Fee

Facebook Could Eliminate WhatsApp's $0.99 Fee

WhatsApp's low annual fee could be even cheaper now that Facebook (NASDAQ: FB) owns the firm.

Eleni Marouli, an advertising analyst at IHS Technology, thinks that Facebook may be willing to entirely eliminate WhatsApp's $0.99 annual fee to attract new users.

"They just want user growth," Marouli told Benzinga. "In order to increase its user growth, they might scrap the fee."

That growth is important to Facebook's overall long-term plans.

"If you look at Facebook's monthly active users, the western European and U.S. numbers, they're kind of stagnant," said Marouli. "They're not growing. In some countries, like the United Kingdom, MAUs are actually declining."

On the other hand, both Facebook and WhatsApp have been experiencing growth in emerging markets. Roughly 30 percent of Facebook's users come from emerging territories, but Marouli said that they currently account for less than 13 percent of total revenue.

"Those guys are accessing [Facebook] through mobile," said Marouli. "In order to target these consumers in emerging markets correctly, you need good mobile data. And there's not good mobile data out there at the moment. What WhatsApp can provide is much more accurate data because it's verified through a phone number -- it's not just a user name. This could be huge for monetization in the long-term in these markets."

Related: Did Instagram Get Screwed By Facebook's $1 Billion Payout?

For now, Sterne Agee analyst Arvind Bhatia believes that the acquisition is all about user growth, but he told Benzinga that there are many e-commerce opportunities for WhatsApp. He also thinks that WhatsApp is insurance against Facebook's biggest competitors.

"It's insurance for Facebook in the sense that if Google bought it, Facebook would have had to fight harder," said Bhatia. "This buys them more engagement, especially in the younger audience, and in the audience in emerging and international markets. Strategically I think the rationale is very sound."

While a number of reports have pegged the WhatsApp acquisition at $16 billion, others have said that Facebook is actually paying $19 billion for the company.

According to Marouli, the final figure will be even higher.

"In cash it's $4 billion," she said. "Then there's some stock options. It can bring the total up to $21 billion if you're considering everything. It's an absolutely massive deal."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Latest Ratings for FB

Nov 2019UpgradesOutperformBuy
Oct 2019MaintainsHold
Oct 2019MaintainsOverweight

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