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WhatsApp And Snapchat Stealing Market Share From Facebook

Jan. 06, 2014 8:23 AM ETMETA, AABA
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Facebook Inc. (NASDAQ: FB) is the world's largest social network with more than 1 billion monthly visitors. The social networking giant is on a mission to have six billion people connected according to its CEO, Mark Zuckerberg. How long that takes remains to be seen. The world's population is estimates to be a little over 7 billion, with people under the age of 18 accounting for the majority of that population. In order for Facebook to achieve its dream of having 6 billion subscribers within the next few years, it will have to offer its social networking services to a unique group of people in the society.

Over the last couple of years, there have been several startups which have threatened to challenge Facebook, especially within the teen population. Such include the likes of WhatsApp, Yahoo! Inc.'s (NASDAQ:YHOO) Tumblr, Kik, Vine, Pheed, and Snapchat. All these startups have threatened facebook in one way or another, but the most prominent ones have been WhatsApp (which has already surpassed Instagram in terms of registered users) and Snapchat. Following the realization of the threat, Facebook went on to change its messaging app to support short messaging with people who are not on Facebook. According to reports, this was seen as a move to curtail the advances made by WhatsApp and Snapchat.

WhatsApp has proved to be one of the most successful mobile apps since the shift to mobility began. Social networks like Facebook, on the other hand, which rely very much on desktop computers, have continuously been growing their presence in mobile phones. However, WhatsApp seems to be more resourceful for teens than does Facebook, thereby making it a little hard for Facebook to gain traction in that market.

Apart from allowing continuous messaging exchange between users, WhatsApp also allows small social groups to be formed where a group of friends can stay in touch and converse all at the same time. This poses an additional threat to Facebook, especially considering that WhatsApp's unit cost for communicating with friends is quite low. Furthermore, consider the fact that WhatsApp also allows automatic photo sharing, which could be another good reason to stay out of Facebook.

All of this illustrates how WhatsApp has been taking a good chunk of Facebook's market share; including potential market share.

Should Facebook Worry?

I do not think that the impact is significant in regards to Facebook's revenues. However, if WhatsApp and Snapchat continue gaining market share at current rates, then it could be a huge problem for Facebook in the future. Nonetheless, the social networking giant is already making plans to make sure that does not happen with reports linking it with a possible takeover of either of the two mobile chat apps. It has also redesigned its messaging app, which gives it another option.

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