The Problem With WhatsApp

 | Feb 22, 2014 | 1:30 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

amzn

,

FB

,

GRPN

Facebook (FB) CEO Mark Zuckerberg has been overwhelmingly praised for his aggressive move to buy the startup WhatsApp this week. One writer claimed that with the acquisition, Facebook had assured that it had "won the messaging battle, if not the war."

But that is just not true. Although WhatsApp is a great service, it is not the worldwide leader in number of users. That honor goes to China's WeChat.

Overseas, WhatsApp is popular in India and other countries. But it is nowhere in China or in Japan, where Line is king -- and South Korea has KakaoTalk.

WeChat, Line and Kakao are fighting to dominate Southeast Asia. Line has done a fantastic job capturing key European countries like Spain. In North America, Kik has a lock on the youth market.

In terms of making money from its services, WhatsApp is really at the back of the line, even with 400 million users. WeChat and Line have set the pace for their competitors by showing how effectively e-commerce can be deployed to a large base of users.

We are not talking about the older type of e-commerce popularized by the likes of Amazon (AMZN). These new mobile apps allow people to pay for things, usually at a discount, while they are out walking or otherwise moving around in the world. The promise of being local and mobile, which Groupon (GRPN) discussed for awhile, is being realized right now by these messaging apps. That is going to play out over the next four years.

WhatsApp has done nothing in this area. It is a good bet that Zuckerberg will ensure that it does -- probably after the service doubles its users in the next year or so. If WhatsApp does not eventually offer this capability, users might be tempted to migrate away from its platform to others.

Furthermore, what about innovation? WhatsApp has been the slowest of the pack in terms of adding new features to its service. Perhaps it has deliberately tried to keep things simple.

I find Kik to be the most aggressive of all the messaging apps in terms of innovation. This company is wholeheartedly embracing HTML5 web coding, and sees it as fundamentally changing how we interact with mobile apps in the coming years. It believes we will move from a siloed app world, in which software functions on its own, to one with much more interactivity across apps. It is building the next version of Kik to be more like a starting-point browser, from which you can not only chat, but also do searches and play games -- offering much more profitable revenue streams.

WhatsApp is nowhere in relation to this development. Maybe Facebook will change that. But it is not such a slam-dunk that it will not fall behind its messaging rivals.

Columnist Conversations

Lockheed Martin is fading into the close. The stock opened the session with a gap higher open after rep...
It's hard to argue with the price action or the momentum indicators, but volume, as reflected on the graph at ...
Time resistance to the current rally comes in between 4/22-24. Good reason to trail up stops on any longs! ...
Market continues to power higher going into the last hour of trading. Looking forward to earnings after the b...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.