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Who's dominating the mobile-chat space now?

This week marks the one year anniversary of Facebook's unprecedented $19 billion acquisition of messaging app WhatsApp. So where is the billion-dollar chat space now — and who's winning?

The Facebook “Like” and the WhatsApp logos are displayed in this photo.
Chris Ratcliffe | Bloomberg | Getty Images
The Facebook “Like” and the WhatsApp logos are displayed in this photo.

Messaging as a whole has become one of the most exciting and fastest growing categories in the entire industry. TenCent's (owner of WeChat) estimated valuation could be as high as $100 billion, Line is valued at over $10 billion, KakaoTalk is valued at over $2 billion, Tango is valued at over $1 billion and Kik recently raised $38 million at an undisclosed valuation.

Messaging apps aren't just replacements for text messengers, though. There's more happening on these apps than meets the eye. Snapchat, at its core, is a messaging app.

We're investors in Cord, which is leveraging asynchronous voice messaging, and Snowball, a unified messaging inbox to help you sort through your various messaging apps.

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There's also a big opportunity in blue-tooth powered local connectivity, opening the possibility of all sorts of use cases from communicating with local business and people to replacing the business card. Lynk is a company that is innovating in a big way here. The tie-in is that the future will allow you to enter a room and instantly have access to everybody there on your phone — which is just one way the communication OS totally changes the way we communicate — and Lynk's already making this possible today.

On WeChat, Line and Tango there are games, apps within the messenger (like ride-sharing services, on-demand food ordering, music, content, etc.). People are living inside of these apps, doing most of the things we do across all of the apps on our smartphones on a daily basis. These apps are really social operating systems. Sound familiar?

Who's winning ...

The $19 billion price tag for WhatsApp was — and remains — a head-scratcher for some. But putting price aside, the acquisition makes a ton of sense. Facebook seems to have put aside their plan to build their own smartphone and what do you do if you can't compete on hardware? You compete on software. Google recognized this when they acquired Android in 2005 and Facebook did the same after acquiring companies like Instagram and WhatsApp.

Facebook now has 4 out of the top 11 apps on the iOS app store (Facebook Messenger, Facebook, Instagram, and WhatsApp) and 4 of the top 21 on Android's app store. So, while Apple owns the smartphone, Facebook owns what you do on the smartphone.

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In January, WhatsApp reported having 700 million monthly active users, sending 30 billion messages a day. Global SMS (text messaging) is only roughly 20 million messages per day. They've absolutely obliterated text messaging globally since Facebook's acquisition.

Facebook has definitively built the best social operating system that exists today here in the U.S., but how can they ensure that they'll stay on top — especially as Facebook itself becomes "uncool" for younger generations?


... and who could beat them

Facebook has been slow and reluctant to branch out of its core business and agnostic platform-holder approach. This may get in their way as they try and become the de facto social operating system.

Tencent, for example, is one of China's biggest game publishers (in addition to being the largest social nework), and actually makes 70 percent of their revenue from games. They frequently buy or heavily invest in any companies or spaces that would be huge if combined with their social platforms and aren't afraid of getting their hands dirty to build a significant ecosystem like WeChat by hand via direct integration.

If Facebook keeps their relatively agnostic network operator approach, they may get beaten out by someone willing to take bigger risks to offer bigger value. Apple is a company that understands this much better, I think, and the iTunes Music Store's level of integration with iOS is a great example of a big win for Apple and consumers.

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Ted Livingson, the founder and CEO of Kik, has a very interesting perspective on this. In a blog post he wrote on Medium several months ago, he talked about how most people believe this phenomenon exists because, in China, you have new Internet users who are coming online for the first time through their smartphone (not a desktop like most of us), and therefore are being educated on new services via these chat apps, similar to the app store in the U.S. He then went on to say that the youth in America is beginning to come online for the first time through the smartphone (just like the population in China), and therefore this exact same phenomenon has a good chance of happening here just as it has in China.

So, guess who is the frontrunner to become the WeChat of the West, if they can get out of their own way, once these young consumers come online via mobile for the first time? Yep, you guessed it. Nice work, Facebook.

Commentary by David Hirsch, co-founder and partner of Metamorphic Ventures, an early-stage venture capital firm in New York City. Prior to MV, he spent 8 years at Google, where he was on the founding team that launched Google's advertising-monetization strategy. Follow him on Twitter @startupman.

Disclosure: David Hirsch, through Metamorphic Ventures, is an investor in Cord and Snowball.