Facebook to Acquire WhatsApp for $19 Billion

by Istvan Fekete on February 21, 2014

WhatsApp and Facebook have agreed a deal that will define the value of startups for this year: the social media giant will pay $19 billion in cash and stock.

WhatsApp is a 55-employee company that developed a tool that replaces text messaging as we knew it, and the app has experienced incredible growth during the past nine months to 450 million monthly users – nearly twice the number of Twitter users, which currently has 240 million users and it is valued at $30 billion.

The deal was revealed in a filing with the Securities and Exchange Commission and is the social media giant’s biggest acquisition to date. Just compare it with the $1 billion deal with Instagram’s founders.

Facebook has been exploring the use of WhatsApp and other messaging services that have gained popularity among teens (e.g. the $3 billion offer for Snapchat), particularly since Facebook’s influence in this area began to wane.

Facebook has admitted recently that teens are spending less time using its platform, so the acquisition of a messaging service such as WhatsApp is an attempt to fill that gap. Although Facebook does offer messaging services – it has its own messenger app – it has failed to gain traction.

Also, a very important factor in the deal is that WhatsApp instantly gives Facebook access to a very large group of teens who are busy messaging each other on a daily basis.

As it turns out, the rumours were true, because Facebook wasn’t the only company in the race for WhatsApp. Google has been courting the startup but made a “low-ball” $10 billion offer. By comparison, $19 billion sounds more attractive, I think.

WhatsApp has been making headlines as the killer messaging app, and given its rapid growth, it was only a matter of time before some tech giant made a sufficiently attractive offer. And, by the way, it is another great channel through which to serve ads.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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