Okay, it happened.
Jumping Into the Tornado: Market Insights From the $19 Billion WhatsApp Acquisition
Is there anything you really need to learn from it?
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It’s probably not as crazy as it sounds. The question is, is there anything you really need to learn from it? I think there is.
WhatsApp generated enormous traction at record speed when Facebook acquired it for $19 billion.
To do this, the five-year-old company did not “cross the chasm.” It jumped right “inside the tornado.” The fact that they could do this is due to a key difference between how B2B and B2C markets process digital disruptions, one that I call out in the latest edition of “Crossing the Chasm,” a revision that keeps the same core arguments, but which draws all its examples from companies coming to prominence in the 21st century.
The key difference is that digital disruptions in consumer markets encounter much less resistance than in business markets, in part because they can deliver a whole product in a capsule, cloud to device, without having to orchestrate the cooperation of a host of intermediaries. A lot of the friction that creates the chasm is simply bypassed.
The fact that WhatsApp did not invest a single cent in marketing makes it an excellent example of what can be achieved with a deeply viral product experience in consumer markets. The model that best describes these market dynamics is one we call the Four Gears, pictured at right.
The idea behind this model is that digital markets “spin up” through the rapid acceleration of each of these four gears working in tandem with the other three. That said, there is a sequence to getting this synergy started that goes like this:
- Engage first. Develop a digital experience that demonstrably engages end users in a deep way. This is the initial power gear. The deeper and more visceral the engagement, the better. Spending extra time here to get this just right is time well spent, because everything ultimately comes back to user engagement.
- Acquire next. Drive traffic to your experience at an accelerating rate. Begin somewhat slowly to confirm that your engagement gear is still spinning freely with these new users. Once you are confident engagement will scale, then drive acquisition as fast as you can afford.
- Then enlist. At some point, buying new traffic will break the bank. You need to get a viral process going where your most engaged users actively proselytize on your behalf. Communication apps have a big advantage here, as they are naturally viral, but someone figured out how to spread the battle between cranky avians and complacent pigs, and who would have thought your pal Sarah would actually feed your cow?
- Then monetize. Monetization comes in many forms. Indeed, the more technically accurate word to use here is Convert. At some point, a high volume of engaged users need to be put in service to an economic outcome. Interestingly enough, however, that may be the job of your acquirer rather than you. Hello Facebook. Hello Google.
Final thought: As you fire up your four gears, at any point in time prior to generating your own tornado, you are looking for faster synchronized spinning. The best way to manage this is to identify which gear is currently the slowest, the one that is holding the other three back, and then pour your efforts into speeding up that gear as quickly as possible. And when you succeed; then target the now-slowest gear, and repeat the process.
Continue until your success attracts a robust acquirer, or you faint from exhaustion. Either way, it should be a heck of a ride.
Geoffrey Moore is an organizational theorist and management consultant. For the past three years, he has been advising executive teams in high-tech while serving as a venture partner at Mohr Davidow Ventures. His book, “Crossing the Chasm: Marketing and Selling Disruptive Products to Mainstream Customers” is now in its third edition. Reach him @geoffreyamoore.
This article originally appeared on Recode.net.
