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TMCNet:  Facebook Buys Messaging APP Whatsapp for $19bn

[February 21, 2014]

Facebook Buys Messaging APP Whatsapp for $19bn

(AllAfrica Via Acquire Media NewsEdge) Facebook is buying mobile messaging service WhatsApp for $19 billion, by far the company's largest acquisition, bigger than any that Google, Microsoft or Apple have ever done.

The world's biggest social networking company said Wednesday it is paying $12 billion in Facebook stock and $4 billion in cash for WhatsApp.

In addition, the app's founders and employees will be granted restricted stock worth $3 billion that will go on for over four years after the closure of the deal.

The deal translates to roughly 11 per cent of Facebook's market value. In comparison, Google's biggest deal was its $12.5 billion purchase of Motorola Mobility, while Microsoft's largest was Skype at $8.5 billion.

Facebook's new acquisition has a broad global audience. Facebook CEO Mark Zuckerberg said: "WhatsApp is the only widely used app that has more engagement and a higher percentage of people using it daily than Facebook itself." WhatsApp, a free messaging service for smartphones, lets users chat with their phone contacts, both one-on-one and in groups. The service allows people to send texts, photos, videos and voice recordings over the Internet. It also lets users communicate with people overseas without incurring charges for pricey international texts and phone calls.


Facebook said it is keeping WhatsApp as a separate service, just as it did with Instagram, which it bought for about $715.3 million nearly two years ago.

WhatsApp has more than 450 million active users. At $19 billion, Facebook is paying approximately $42 per WhatsApp user in the deal.

"For Facebook, WhatsApp's huge user base, growth pace and popularity is worth the money," Zuckerberg said.

"We want to develop more mobile experiences beyond just the main Facebook app, like Instagram and Messenger," Zuckerberg said in a conference call.

Asked about the demographics of WhatsApp's users, Facebook finance chief David Ebersman said: "If you look at the kind of penetration WhatsApp has achieved, it goes without saying that they cut across demographics." "WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide. We're are honoured to partner with Mark and Facebook as we continue to extend our services to more people around the world," said Jan Koum, the Whatsapp Cofounder and CEO .

Users express optimism Gilbert Rwabigwi, the Director of Ejo Social Media, a firm involved with social media marketing and management, predicted that with the acquisition, users should brace for high quality services.

"Facebook, being a multi-billion company, guarantees WhatsApp's improvement as a social networking application," Rwabigwi said.

Jovani Ntabgoba, the General Manager of K-LAB, a Kigali-based open technology hub for IT entrepreneurs, said the development was an inspiration to local developers .

Robert Ford, the Chief Executive Officer of Filmax Web Technologies, a local Information technology firm, said the deal will benefit both parties.

"Its previous owners have earned money from selling it off, and the users will benefit from the expected improvement in quality of service delivery," he said.

But Jacob Ndutiye, a student at Mount Kenya University and social media enthusiast expressed concern over the move, fearing that WhatsApp's new owners may start charging users highly.

"A company cannot invest over $19 dollars in something and not expect quick returns from it," he said, adding that charging every user may be an option.

Copyright The New Times. Distributed by AllAfrica Global Media (allAfrica.com).

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