Does Facebook’s $19B purchase of WhatsApp make sense?

Most of me wants to say no. Only for two reasons.

One, WhatsApp would be in kindergarten if it was a child, and its entire staff could fit on a Greyhound bus. Seeing them valued at the same market cap as a company like Sony makes my brain hurt. Oh, and they make about as much revenue as a bag boy does at the local Kroger.

Two, I’m jealous. I’ll admit it. How can I not be? A valuation of around $500-million per employee is any startup’s dream. If our company hit 1/10 that valuation I’d have a grin glued to my face. Fortunately, I’d make enough so that I could afford surgery to restore my face to normal.

But after I thought it, I don’t think Zuckerberg is insane. While there’s no revenue model in the world that can justify that price for a service that barely brings in revenue (and certainly isn’t profitable), I think that Facebook was more likely to be asking themselves, “How much is it worth to keep someone else from buying WhatsApp?”.

Yes, Facebook is the world’s largest social network and is already a bit more Orwellian than most of us would like. But it’s no longer the place to be, especially among teens. Facebook even admits that:

Just a year ago, 42% of teens surveyed told pollsters they preferred Facebook to all other services; by spring, that had fallen to 33%, and now stands at 23%.

In other words, Facebook can’t assume that younger people will continue to see its service as the de facto place to share selfies. Teens have Instagram (which Facebook bought), SnapChat (which they tried to buy), and WhatsApp (bought). And let’s not forget Twitter, WeChat, Line, and Viber (each with at least 200 million users) competing for market share. With over 450 million users on WhatsApp, Facebook would take on a huge penalty should it fall into the hands of a Google or a Yahoo!.

Facebook itself only took a handful of years to go from dorm room project to international behemoth; what’s to keep another social network from displacing it in short order? That full discussion is probably worthy of a separate blog post, but the short answer is not much. At this point, Facebook has to be just as defensive (by keeping other large networks from coming under the control of a competitor) as it is offensive (by continuing to pursue both user and revenue growth).

Is $19 billion the right amount to pay for that defense? We’ll never know for sure, but if it keeps Facebook relevant with teens and holds off a challenging social network from displacing it for a few more years, the answer is yes.

Why culture matters in building community

Punk rock bands. Star Trek enthusiasts. World Cup soccer fans. Communities of real people, each of which have their own set of behaviors and norms. Anthropologists call this “culture”. Now let’s look at a different group of communities: Quora, TED, Google+. Do these online communities also have a culture? Of course they do. Let’s take a look at how each established a culture early on, and what this means for new communities:

Two former Facebook employees founded the Q&A site Quora in 2009. Quora is all about thoroughness. Why? First, Quora encourages using your real identity, not an alias, so you’re accountable for your work. Second, users vote up or down answers based on their quality. Finally, many early adopters were from the tech industry, where meritocracy rules. Glib contributions don’t get you far in that field. The combinations of these three factors, established early on, meant that Quora became a place where meaningful information is the norm. You can imagine what the site might like otherwise – just take a look at the comments under any YouTube video. Want to hear what happened when these norms were broken? Read this post by Robert Scoble.

TED Conversations was developed just earlier this year. It’s a debate forum for TED enthusiasts. This community strongly encourages quality discussion. The “TED community” is very much a reflection of the TED talks that have been taking place for several years – intellectual, well thought-out, and poignant discussion around complex issues. As you might expect, TED Conversations is a very polite place, a behavior no doubt influenced by the fact that TED talks encourage sharing and appreciating different viewpoints. Take a look at TED’s guidelines, and you’ll see plenty of statements like “if you choose to start (or join) an Idea conversation, it’s important to maintain a polite attitude toward what’s working and what needs fine-tuning.” This community will obviously be a place where intellectuals thrive.

Finally, Google+ is a nascent community whose culture is still being developed. See if you can imagine where it’s headed, though: “Circles” allows you to arrange your contacts into relevant groups. “Hangouts” and “Huddles” are features that allow groups to easily video chat or IM together. And “Sparks” is a way for users to find content relevant to them, particularly if it’s shared by people within their Circles. It’s too early to tell exactly what Google+’s culture will look like, but it’s obvious that informal group sharing will be at the core. My guess is that Google will allow its users to establish the sites culture as much as Google will itself.

So why make a point of understanding these online “cultures”? Each of them has been successful (in their own way), by being very intentional about how users behave within each community. Think about how difficult it would be to change any of these cultures, after norms were already established. Having trouble? Just review the negative feedback Facebook dealt with when it changed its privacy settings.

If you are planning to build your own online community, sites like these are worth paying attention to. The culture you build for your community is primarily defined by the norms you establish early on. Since it’s much easier to do this right the first time, ask yourself: “What kind of culture do I want to establish? How do I want users to interact with each other and with my organization?” Pick whatever behaviors you’re looking for, and set those as the default way for taking part in the community. Don’t pay attention to this, and you may as well not even start!

What do you think – how does establishing the right norms early on establish the long-term behavior of an online community? What are some other examples that have a done a particularly good (or bad) job of this?