Facebook announced the purchase of the mobile messaging
service WhatsApp on Wednesday, in a $19bn deal that represents the social media
company’s biggest acquisition yet.
Mark Zuckerberg, the
founder of Facebook, described five-year-old WhatsApp as an “incredibly
valuable” service that was well on its way to connecting 1 billion people
around the world.
The deal is a big bet for
Facebook, which has until recently struggled to convince investors of its
strategy for mobile.
WhatsApp has more than
400m users around the world and claims it is adding more than 1 million new
registered users a day. It allows unlimited free text-messaging and picture
sending between users and is among the world’s most downloaded mobile apps.
Facebook’s successful bid comes after Google reportedly made a $1bn offer for
the company last year.
“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 [Koum founder and CEO] for a long time and I’m excited to partner
with him and his team to make the world more open and connected.”
Koum said: “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
honoured to partner with Mark and Facebook as we continue to bring our product
to more people around the world.”
Facebook is making the
purchase in a mix of cash and stock. WhatsApp will receive $12bn in Facebook
shares $4bn in cash and an additional $3bn in restricted shares that will be
paid out to executives at a later date. The company will operate as an
autonomous unit.
The company’s ownership
structure has not been disclosed but one Silicon Valley source said he believed
WhatsApp employed fewer than 100 people. “Probably five people are going to be
rich beyond belief, the rest are going to be rich and there’s an admin assistant
who right now is picking out the colour of her Lamborghini,” he said.
The massive acquisition -
Facebook’s largest ever - comes as tech firms are fighting to build their
mobile businesses. WhatsApp is particularly big in Europe and Latin America
where its market penetration is thought to top 80% in countries including
Brazil, Germany, Portugal and Spain.
Last year Facebook made
an unsuccessful $3bn bid for SnapChat, a service that sends messages that erase
themselves after a short period. The social media firm is making the move as
WeChat, owned by China’s Tencent, is rapidly building its service in the west.
“This is the new
generation of messaging services,” said Marcos Sanchez, vice president of App
Annie, an analyst specialising in mobile technology. “Facebook understands
there is a generational shift in the way people connect.”
Facebook faltered after
its share sale in May 2012 as analysts worried the company was losing out as
its users moved to mobile. It has since recovered and has concentrating on building
up its mobile business. But the company has also warned that teenagers are
cooling on its service.
Sanchez said that the
“social messaging” services like WhatsApp, WeChat and Snapchat were attracting
a younger audience. In China the services have even been linked to bank
accounts and can be used to make purchases at stores and restaurants including
McDonalds.
“Younger users seem to
prefer something more ephemeral, something that changes moment by moment,” he
said. “WhatsApp gives Facebook a major player in that space.”
The WhatsApp purchase
price marks a new height in an increasingly frenzied technology scene. On
Tuesday King, maker of the phenomenally popular Candy Crush Saga mobile game,
announced a stock market floatation that would value the firm at more than
$5.5bn. Last month Google paid $3.2bn for Nest, maker of “smart” home
appliances like thermostats and burglar alarms.
Koum and his co-founder
Brian Acton met while at Yahoo in 1997 and launched the service in 2009. By
2011 users were sending more than a billion essages a day on the service.
“Doctors in India are using WhatsApp to instantly send
electrocardiogram pictures of patients who’ve suffered heart attacks, saving
valuable time and potentially lives,” Koum wrote on the company blog last year.
“In the mountains of Madrid, rescuers used
WhatsApp to locate and save lost hikers. And today, as I follow the unfolding
political crisis in Ukraine, the place where I was born and lived until the age
of sixteen, I can’t help but hope that the next great WhatsApp story will be
about people using the service to speak their mind and stand up for their basic
rights.”
10 key numbers
$19bn - Price being paid by Facebook
55 - number of WhatsApp
founders and employees
450m - number of people
using the service each month
70% - proportion of those
users active on a given day
1m - new registered users
per day
1bn - WhatsApp’s target
for number of users
19bn - messages sent via
WhatsApp each day
34bn - messages received
via WhatsApp each day
$1.82 - the amount by
whicvh Facebook shares fell after the deal
$2bn - the ‘break fee’
Facebook will pay to WhatsApp if the deal fails to go through
2009 - year WhatsApp was
founded
$1bn - value of
Facebook’s previous biggest deal, Instagram
Source: TheGuardian
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