Facebook’s Acquisition of Kustomer – What Makes This Unique?

Despite the decline in M&A activity as a result of the COVID-19 pandemic, as well as recent scrutiny over possible infringement of antitrust laws, Facebook’s pursuit to cement itself at the forefront of social media companies has not ceased. On the 30th of November 2020, Facebook announced its acquisition of Kustomer, a top-rated Customer Relations Manager founded in 2015 that enables businesses to effectively manage all customer interactions across channels. The deal, whose value was speculated to be approximately 1 billion USD, was advised solely by JPMorgan Chase & Co. Through this acquisition, Facebook aims to ramp up its Customer-Relationship Management (CRM) game and looks to Kustomer’s proprietary “omnichannel relations” to strengthen interactions between consumers and businesses on its platforms. In the words of Dan Levy, Facebook’s Vice President of Ads and Business Products, ‘our goal with Kustomer is simple: to give business access to best-in-class tools that deliver excellent service and support.’

 

Kustomer is a customer management platform for enterprises focused on delivering seamless customer service. The company’s platform boasts a revolutionary “single-screen view” that assists agents by gathering customer communications from a variety of channels such as apps, social media, websites, email and compiling them onto a single screen. With the convenience of having the required information unified, these agents can gain a more detailed insight into a customer’s request and will therefore be able to deliver optimum customer service. The advantage for Kustomer is that being acquired by Facebook will allow them to significantly scale up their technology and services. This would also signify taking advantage of Facebook’s far larger customer base, with more than 175 million people estimated to use WhatsApp to converse with businesses.

 

Faced with increased pressure from existing social media companies like Snapchat and newer platforms like TikTok that have the potential to erode Facebook’s customer base, CEO Mark Zuckerberg has disclosed his plans to diversify into e-commerce and ameliorate the support provided to its business clients. Facebook is now well-equipped with this robust omnichannel tool to automate customer service responses and thus provide a higher calibre of communication by maximising the time and quality of interactions with customers. Furthermore, the acquisition of Kustomer will bolster Facebook’s efforts to monetise its messaging business. This would allow Facebook to create an alternative revenue-generating stream to complement its current largest and most traditional source of cash flow that is advertising (which accounts for approximately 98.5% of their total revenue according to Statista).

 

Amidst the surge in demand for online shopping and e-commerce resulting from widespread global lockdowns, it is clear why Facebook has prioritised enhancing its customer messaging service as part of its overall strategy. In particular, Facebook is keen to implement WhatsApp as the core of its business strategy as the company is presently the world’s most popular messaging platform. The principal objective is to expand on and capitalising the rapidly growing number businesses that already engage with customers on WhatsApp. The social media giant has signed deals with commerce-related businesses in India and Indonesia and is developing a payment feature in the app to unveil in Brazil, with the hope that businesses will use WhatsApp as their de facto website in the future. This would enable customers to browse through products, make purchases and interact directly with the companies for customer service needs within the app.

 

Despite finalisation of the deal, it is still subject to regulatory approval in light of recent accusations that Facebook have been buying emerging start-ups to nullify potential threats to the company. Facebook is currently facing US legal action and antitrust lawsuits from the US government and 48 states over the social media giant’s acquisition of Instagram for 1 billion USD in 2012 and WhatsApp for 19 billion USD in 2014. These barriers act as potential risks to Mark Zuckerberg’s digital empire which could also constrain future ambitions the CEO may have for the company.

 

Regardless of whether it is approved by regulators, this deal is indicative of a prominent change in the company’s strategies moving forward. The demand for managing digital relationships with customers has risen in line with the acceleration in digital transformation caused by the COVID-19 pandemic. Especially in light of the new COVID-19 strains, as the popularity of online shopping and virtual communication persists, it would not be surprising if this acquisition is one that will be applauded in years to come. This could mark the beginning of a new era of high-quality customer service for consumers worldwide.

 

By Jesper Chin

Sector Head: Venkat Rajasingham

 

 

 

 

 

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