TGNEWS | How Google cause big problems for Facebook and WhatsApp

Google (NASDAQ: GOOG ) (NASDAQ: GOOGL ) is reportedly preparing to launch a mobile messaging application to rival Facebook's (NASDAQ: FB ) Messenger and WhatsApp. Although Messenger dominates North America and WhatsApp does the same internationally, Google's entrance into this space could mean bad news for Facebook. Let's look at why.

A glance at Google messaging
Earlier this month, The Economic Times reported that Google's new mobile messaging application will be tested in India before a broader launch in 2015. The report cited sources aware of the plan but also acknowledged that a Google spokesperson failed to comment.

Given that Google was willing to pay $10 billion for WhatsApp before Facebook's acquired it for $23 billion, it's likely that Google is working on such a product. However, details will probably remain sketchy until the final product launches.

The Economic Times provided what information it could regarding the potential new service. Reportedly, users won't need a Google login for the service, and while WhatsApp charges $1 a year for its services, Google's product will be free to use. Google is also said to be testing multiple language features and voice-to-text for the new service.

Trying to catch Facebook
Google has a long road ahead if it wants to catch WhatsApp, and an even longer one to surpass Facebook as the mobile messaging market leader. At last count, WhatsApp had north of 600 million registered users, 10% of them India. Facebook Messenger has another 200 million users, mostly in North America.

Google has tried in the past to compete in Facebook's core markets, most notably with Google+, with less than inspiring results. Investors might be skeptical that Google can make its messenger service relevant enough to affect Facebook, or devalue the $23 billion it just spent to acquire WhatsApp.

However, unlike Google's attempt to sway established Facebook or Twitter users to Google+, Google's new messaging platform will probably be seen as an equal to competing services such as WhatsApp and Viber. The core purpose of using mobile messaging apps is to gain free text messaging and, in many cases, free voice, thereby reducing users' telecom service costs.

Google's attempt to offer free services will give it a small advantage over WhatsApp, but the key element to Google's success is creating a large network of messaging users, making the application accessible and just as useful to the consumer as the likes of WhatsApp.

The Android difference
Google has one major advantage on its side in launching a mobile messaging application: its Android operating system. Like Apple with iOS, Google has the luxury of including preinstalled applications on the operating system.

Moreover, according to research firm IDC, Android accounted for nearly 85% of the 255 million smartphones shipped worldwide during the second quarter. Google has an enormous market for a messenger app, if it decided to preinstall the service on Android phones.

Google is to iTunes Radio as Facebook is to Pandora
When a smartphone user wants to access a messaging service, he or she must first download the app, whether it's WhatsApp, WeChat, or Viber. By preinstalling and making the messaging service a feature of Android, Google could have a great advantage over these services.

Apple's launch of iTunes Radio last year provides a perfect example. The company preinstalled iTunes Radio on devices following the launch of iOS 7, and in just five days it had more than 11 million unique listeners. Five weeks following the iTunes Radio launch, it had over 20 million users. Meanwhile, Pandora's year-over-year user growth was just 7.5% during its most recent quarter, totaling 76.4 million. That's down 1% from May's user base, and it represents a significant year-over-year growth slowdown from Pandora's second quarter of 2013's 30% increase in active listeners.

Facebook's presence in the mobile messaging space is rather comparable to Pandora in the streaming music industry, because it doesn't own the operating system and relies on app downloads. If Google elects to preinstall its messaging application on Android phones, it might very well be comparable to Apple's launch of iTunes Radio.

With many observers believing that Facebook plans to use Messenger and WhatsApp for payment processing, the downsides of monetizing a service for users combined with the competitive challenge from Google might negatively affect Facebook's long-term vision for these mobile messaging platforms.

Foolish thoughts
WhatsApp created about $20 million in revenue last year. Clearly, Facebook didn't purchase the app for its existing business model, but rather to fulfill a vision that CEO Mark Zuckerberg and company saw in its network. Upon closing of the deal, that vision was worth about $23 billion, or 12% of Facebook's entire market capitalization.

Given the value attached to WhatsApp, the potential of declining users or a competitive threat such as Google could cause Facebook stock to slip. While Google's messaging services may have no effect on WhatsApp whatsoever, Android's dominating share of the smartphone market, combined with the opportunity for Google to preinstall the service, both present a compelling risk for Facebook and its $23 billion asset.

The One Stock You Need for 2015
2015 is shaping up to be another great year for stocks. But if you want to make sure that 2015 is your best investing year ever, you need to know where to start. That's why The Motley Fool's Chief Growth Officer just published a brand-new research report that reveals his top stock for the year ahead. We issued a similar bulletin last year, and tipped investors to a winner that's up 89% -- more than six times the return of the S&P 500. And we think this year's top pick could do even better. To get the full story on this year's stock -- COMPLETELY FREE -- simply click here. (http://www.fool.com/investing/general/2014/10/21/how-google-messenger-could-cause-big-problems-for.aspx)