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Facebook picks up WhatsApp for $16 billion

  • 20 February 2014
  • Written by 
  • Published in Deals

Facebook has confirmed one of the biggest app acquisitions in recent years, announcing it has acquired messaging application WhatsApp for US$16 billion.

The deal will see Zuckerberg's social networking giant pay US$4 billion in cash and about US$12 billion worth of Facebook shares for the messaging app, which according to various research may have overtaken SMS globally in terms of messages sent.

The companies said there's also the option for another $3 billion in restricted stock for WhatsApp founders and employees that will settle in over four years after the deal closes.

Facebook said Whatsapp will continue "operating independently and will retain its brand", in a similar way that Instagram has done since it was acquired by Facebook in April 2012.

The company will stay in Mountain View, California while Jan Koum, WhatsApp's co-founder and CEO, will join Facebook's board.

"WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide. We're excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world," Koum said in a press release.

"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO.

"I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."

Industry analyst and CEO of Infinite Convergence Solutions Anurag Lal told iTWire the Whatsapp acquisition "sounds a little insane at first glance" given the revenue model is "unproven", but said it was "another defensive play" for Facebook which is facing an exodus of sorts with younger users switching to apps like Snapchat, and Whatsapp.

Lal also said questions would remain over Whatsapp's revenue strategy, especially given its CEO Jan Koum had promised "no advertising" to its users, while Facebook's sole revenue stream is advertising.

In a blog post, Whatsapp said that "nothing" will change for customers.

"WhatsApp will remain autonomous and operate independently. You can continue to enjoy the service for a nominal fee. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you're using," the company said.

"And you can still count on absolutely no ads interrupting your communication. There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product."

The acquisition comes two months after WhatsApp announced that it had 400 million monthly active users. The app is currently available on Android, iOS, BlackBerry, Nokia S40, Symbian, and Windows Phone, and is free for the first year and US$0.99 per year thereafter.

According to the Wall Street Journal if the merger is terminated in the event it doesn't meet regulatory approval, Facebook would pay WhatsApp a $1 billion cash breakup fee and issue $1 billion in Facebook shares.


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