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By Alexei Oreskovic and Leila Abboud
SAN FRANCISCO/BARCELONA, Feb 24 (Reuters) - Facebook Inc Chief Executive Officer Mark Zuckerberg took a victorylap at the world's largest mobile technology conference inBarcelona on Monday, after beating out Google Inc in a$19 billion acquisition of free messaging service WhatsApp. Buthe faces bigger hurdles on the horizon.
Just 18 months after appearing at risk of getting crushed bythe swelling mobile wave, the No. 1 social network is ridinghigh. It gets a huge chunk of ad revenue on world-wide users of smartphones and tablets, from virtually nothing several yearsago.
Now, Zuckerberg's purchase of WhatsApp - while raisingeyebrows with the hefty price paid for a company that boasts 450million users but has little revenue - places Facebook at theheart of smartphone communications.
"In the U.S. you can dial 911 and get access to basicservices," Zuckerberg said, referring to the country's nationalemergency services phone number.
"We want to create a similar kind of dial tone for theInternet," he said, citing messaging, search and weatherinformation among the essential online services that he saidpeople throughout the world should be able to access onInternet-connected phones.
It's a vision that is sure to have some telecom bosses inBarcelona gritting their teeth. WhatsApp and its fellowmessaging apps, including Viber and China's WeChat, have puncheda hole in operators' sales by offering a free alternative totext messages, a $120 billion market for operators. Researchgroup Ovum said telcos lost $32 billion in text revenue lastyear and will lose $54 billion by 2016.
But Zuckerberg is trying to cast Facebook and WhatsApp aspartners not foes of the industry.
The 29-year-old co-founder of Facebook used his appearanceat Mobile World Congress on Monday to talk up his company'srecent effort to make wireless Internet access easier and moreaffordable in developing countries.
With WhatsApp now part of Facebook, Zuckerberg said themessaging service will have the breathing room to put its energyinto garnering another 2 billion or 3 billion users, rather thantrying to generate revenue.
SURPRISE DEAL
Facebook's purchase of WhatsApp is its latest move totransform a platform and company born on the PC into afull-fledged network for a mobile generation. Zuckerberg'sprogress so far on mobile has positioned the company to takeadvantage of the fast-growing markets. And it has helped boostFacebook's stock roughly 150 percent since July.
But with a new crop of smartphone applications threateningto eat into Facebook's audience, worrying signs of waninginterest amongst younger users - which the WhatsApp acquisitionmay help address - and a tech landscape evolving more rapidlythan ever before, Facebook can't afford to fall behind again.
That is critical for Facebook as it courts the "next 5billion" Internet users, many of whom live in places like Indiaand Africa and who are likely to first experience the Interneton a mobile rather than a PC.
"If Facebook is not first in line when those people arefiring up their devices, it stands a chance of never connectingwith those folks, because there are so many alternatives," saidBrian Blau, an analyst at research firm Gartner.
Zuckerberg said the plan to bring wireless Internet access,and Facebook, to the world is a long-term project that won't payoff anytime soon.
"I think we're probably going to lose money on this forquite a while," Zuckerberg said.
NO SURE THING
To some, Google wields the advantage for now.
Its Android mobile operating system comes pre-installed onroughly 80 percent of the smartphones sold in the world today.That helps ensure new users will see and use its various onlineservices, including search, maps and its Google+ social network.
Once WhatsApp is in Facebook's pocket, there's no guaranteethe messaging service - which famously eschews games, shoppingor other popular add-ons to focus on pure messaging - can remainahead in a notriously fickle market.
Rival messaging apps such as Tencent Holding's WeChat and Naver's LINE are popular across Asia andhave hundreds of millions of users. They have also expanded toallow users to book taxis, top up phone credit, and take part inflash sales, all on the app.
WhatsApp, which Zuckerberg has promised will remainindependent, fits Facebook's recent approach of designing orbuying "spinoff" apps for smartphones, such as Instagram or thePaper news app, which has earned positive reviews.
"You see Facebook trying to increase its surface area, withdifferent apps for different things," said Josh Elman, a venturecapital firm Greylock Partners. The idea is to give usersmultiple ways to interact with Facebook throughout the day.
To meet his ambitions, Zuckerberg could use the telecomindustry's help. He will make his case to the handset makers andoperators gathered in Barcelona that they should work togetherto make Internet access cheaper and more ubiquitous in thedeveloping world.
Facebook has partnered with over 150 wireless providers overthe past four years to offer free or discounted access to thesocial network, including a deal with Globe Telecom to providethree months of free access to customers in the Philippines.
Once people experience the benefits of wireless Internetaccess they will upgrade to additional data services, generatingmore profit for wireless carriers, Zuckerberg said.
The idea, he said, is to build a "more profitable model,with more subscribers for carriers, and get everyone on theInternet in a hopefully shorter period of time."
Not everyone is on board.
Vodafone Chief Executive Vittorio Colao said earlierthis month that Facebook had approached him about waiving datacharges when customers access the website from their mobiles.But Colao rejected the idea because he didn't see any benefitfor his company, which is Europe's largest wireless carrier andalso operates in India and across Africa.
