Facebook to Buy Messaging Startup Service WhatsApp for $19 Billion
In an apparent move to reign over messaging options on phones and online, Facebook is purchasing WhatsApp for nineteen billion dollars.
That's an astonishing amount for the startup messaging service, which is less than five years old. According to TechCrunch, the deal includes twelve billion dollars in Facebook shares, four billion dollars in cash, and three billion dollars in Facebook stock for WhatsApp employee retention.
The figure seems astronomical, even compared to recent high offers Facebook has made to other social apps. It bought Instagram for a billion dollars in 2012, and a bid for three billion dollars was extended to Snapchat in November.
However, analysts think the deal is a smart strategy on the social network's part to maintain its place as a mobile leader. Even though WhatsApp may not quite be a household name in the US, it’s much more popular in Europe, South America, Africa, and Australia, and has earned a place among other personal communication giants such as Twitter, Google, and Skype.
WhatsApp has more than 450 million monthly users—second only to Facebook, by the way—and its messaging volume is nearly the SMS volume of the entire global telecom industry. On top of that, it’s adding a million users every day.
“WhatsApp is on a path to connect one billion people. The services that reach that milestone are all incredibly valuable," Facebook founder and CEO Mark Zuckerberg said in a news release.
They’re especially valuable considering investors are worrying about the social network’s waning popularity with teens and twenty-somethings. Though WhatsApp is a free service, the monetization potential of its young user base is high.
As it currently stands, Facebook essentially has a monopoly on social networking with desktop users, but mobile users have so many different niche apps they prefer—and those smaller players threaten to gradually cannibalize Facebook’s services. Purchasing WhatsApp was a smart business decision to make users associate Facebook more with mobile.
"Facebook continues to demonstrate savvy-ness beyond its years as it pivots its business model, footprint, and strategy to mobile," Deutsche Bank analyst Ross Sandler told Reuters.
Zuckerberg said in his Facebook blog post about the acquisition that WhatsApp will continue to operate independently and retain its brand, and cofounder and CEO Jan Koum will join Facebook’s board.
