Facebook is buying mobile messaging service WhatsApp for $19 billion in cash and stock, by far the company’s largest acquisition and bigger than any that Google, Microsoft or Apple have ever done.
The world’s biggest social networking company said on Wednesday that it is paying $12 billion in Facebook stock and $4 billion in cash for WhatsApp. In addition, the app’s founders and employees – 55 in all – will be granted restricted stock worth $3 billion that will vest over four years after the deal closes.
Facebook likely prizes WhatsApp for its audience of teenagers and young adults who are increasingly using the service to engage in online conversations outside of Facebook, which has evolved into a more mainstream hangout inhabited by their parents, grandparents and even their bosses at work.
“This is a bet on the future for Facebook,” Blau said. “They know they have to expand their business lines. WhatsApp is in the business of collecting people’s conversations, so Facebook is going to get some great data.”
In November last year, Facebook tried to acquire SnapChat but Mobile messaging start-up Snapchat rejected an acquisition offer from Facebook Inc that would have valued the company at $3 billion or more, according to a Wall Street Journal report on Wednesday.
The biggest buys: Facebook vs Google vs Microsoft
Facebook’s $19 billion in cash and stock acquisition of WhatsApp is by far the company’s largest and bigger than any that Google, Microsoft or Apple have ever done. The deal translates to roughly 9 per cent of Facebook’s market value. In comparison, Google’s biggest deal, Motorola Mobility, stood at $12.5 billion, while Microsoft’s largest was Skype at $8.5 billion. Apple, meanwhile, has never done a deal above $1 billion.
Reason behind Acquiring WhatApps
Facebook has dipped into its wallet to make its biggest acquisition to date, splurging almost $US19 billion dollars to buy mobile-messaging app WhatsApp. Four billion dollars of that is upfront, which is more than the $US3 billion knocked back by its previous target SnapChat last year.The Facebook-WhatsApp tie-up is the biggest tech deal since the $US124 billion marriage of AOL and Time Warner in 2001. So Facebook is finally growing up, the listing hiccups are a thing of the past and, like a grown-up company, it’s happy to splurge to get the job done.
Is it money well-spent? Well, that depends on what Facebook thinks it’s paying for.
- Eco-Sytem : WhatsApp has more than 450 million members, with one million users being added daily. According to Facebook, WhatsApp will have one billion customers in just over a year, provided the current growth rate is maintained.
- Diversification from core : If you want to be a major consumer technology platform, you need to be diverse.Facebook’s journey started with Instagram and has progressed to WhatsApp. Along the way it’s had a stab at home-grown products like Facebook Home and Facebook Paper, and also picked up revenue-generating businesses like Parse, a cloud outfit that hosts back-end services for app developers.
- But the messaging volume on WhatsApp is apparently approaching the entire worldwide SMS messaging volume of mobile carriers. That kind of growth is hard to ignore, especially when Facebook is counting on applications beyond its main social network to reach more mobile users.
- Insight Gain of Enormous Data Flow through the entire Eco-System
- To engaging with the teenage market : help you understand the customer and the targeting ability for advertising becomes so much stronger
A Brief About WhatApp :
Year founded: 2009.
Company founders: Former Yahoo engineers Jan Koum (the current CEO) and Brian Acton.
Headquarters: Mountain View, Calif.
Number of employees: 55.
Messages are sent over the Internet, to individual people or groups.
One check mark next to a message means it’s been delivered; two check marks means it’s been seen.
Price users pay for one year of service: 99 cents.
Number of monthly WhatsApp users: 450 million.
Number of people who use Facebook’s mobile products, including Facebook Messenger and Instagram every month: nearly 950 million.
Number of WhatsApp texts sent per day: 19 billion; texts received on the service per day: 34 billion.
Number of daily voice messages sent with WhatsApp: 200 million; daily video messages: 100 million; daily photos: 600 million.
- “450. WhatsApp has more than 450 million active users, and reached that number faster than any other company in history. It was just nine months ago that WhatsApp announced 200 million active users, which was already more than TwitterTWTR -4.61%. Every day, more than a million people install the app and start chatting, and they remain more engaged with WhatsApp than on any other service. Incredibly, the number of daily active users of WhatsApp (compared to those who log in every month) has climbed to 72%. In contrast the industry standard is between 10% and 20%, and only a handful of companies top 50%…
- “32. Even by the standards of the world’s best technology companies, WhatsApp runs lean. With only 32 engineers, one WhatsApp developer supports 14 million active users, a ratio unheard of in the industry. (WhatsApp’s support team is even smaller.)…
- “1. Jan keeps a note from Brian taped to his desk that reads “No Ads! No Games! No Gimmicks!” It serves as a daily reminder of their commitment to stay focused on building a pure messaging experience.
- “This discipline is reflected in WhatsApp’s unconventional approach to business. After one year of free use, the service costs $1 per year — with no SMS charges. This can save users trapped in expensive data plans up to $150 per year…
- “0. There may be no greater testament to the viral nature of WhatsApp than the fact that the company has accomplished all this without investing a penny in marketing.”