Why Facebook Acquired WhatsApp For $19 Billion

October 13, 2014

Facebook's acquisition of Whatsapp

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What’s This?

WhatsApp is an instant messaging subscription service for smartphones and selected feature phones that uses the internet for communication. In addition to text messaging, users can send each other images, video, and audio media messages as well as their location using integrated mapping features.

WhatsApp is supported on most Android, BlackBerry, iPhone, and Nokia smartphones. All Android phones running the Android 2.1 and above, all BlackBerry devices running OS 4.7 and later, including BlackBerry 10, and all iPhones running iOS 4.3 and later. WhatsApp currently charges a dollar a year after giving customers their first year of use for free.

Early this year, Facebook acquired WhatsApp for the astronomical sum of $19 billion. Facebook paid WhatsApp $4 billion in cash and $12 billion in stock. CNN claims WhatsApp’s founders and staff will be eligible for for another $3 billion in stock grants to be paid out if they remain employed by Facebook for four years.

WhatsApp has 600 million active users worldwide, and adds an additional million users every day. In April 2014, WhatsApp had over 500 million monthly active users, with 700 million photos and 100 million videos shared each day, and the messaging system handles more than 10 billion messages each day.

In August 2014, Whatsapp had over 600 million active users worldwide. WhatsApp added about 25 million new users every month or 833,000 active users per day. With 65 million active users, accounting for about 10% of total worldwide users, India is the largest single country in terms of number of users.

Whatsapp growth




Referring to WhatsApp’s prominent growth, Facebook CEO Mark Zuckerberg said, “No one in the history of the world has done anything like that.”

CNN reports that Zuckerberg said he doesn’t anticipate trying to aggressively grow WhatsApp’s revenue until the service reaches “billions” of users. What makes WhatsApp unique is that it allows people to connect via their cellphone numbers. But WhatsApp sends the actual messages over mobile broadband, and that makes WhatsApp cost effective for communicating with people overseas.

TechCrunch notes that Zuckerberg said Facebook’s acquisition of WhatsApp was closely related to the Internet.org vision. According to the TechCrunch article, Zuckerberg’s vision for Internet.org was as follows:

“The idea, he said, “is to develop a group of basic internet services that would be free of charge to use – ‘a 911 for the internet.’ These could be a social networking service like Facebook, a messaging service, maybe search and other things like weather. Providing a bundle of these free of charge to users will work like a gateway drug of sorts – users who may be able to afford data services and phones these days just don’t see the point of why they would pay for those data services. This would give them some context for why they are important, and that will lead them to paying for more services like this – or so the hope goes.”

Jim Goetz, writing on behalf of Sequoia Capital, claims “WhatsApp has done for messaging what Skype did for voice and video calls. By using the Internet as its communications backbone, WhatsApp has completely transformed personal communications, which was previously dominated by the world’s largest wireless carriers.”

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