February 19, 2014
Facebook Buys Messaging Start-Up WhatsApp For $16 Billion
Peter Suciu for redOrbit.com – Your Universe Online
On Wednesday, social media giant Facebook announced that it would acquire WhatsApp, a personal real-time messaging network allowing millions of people around the world to stay connected with their friends and family.
This is the largest acquisition for Facebook to date, but WhatsApp has a large user base with more than 450 monthly users. Of those, 70 percent reportedly are active daily. The start-up has claimed that it is adding more than 1 million new registered users per day.
Forbes reported on Wednesday that WhatsApp has seen massive growth since it was launched last year. Since that time, users have sent 18 billion messages and received 36 billion in return.
“WhatsApp is on a path to connect one billion people. The services that reach that milestone are all incredibly valuable,” Mark Zuckerberg, Facebook’s founder and chief executive, said in a statement. “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.”
“WhatsApp’s extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide,” WhatsApp CEO Jan Koum said in a statement. “We’re excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world.”
According to the Wall Street Journal on Wednesday WhatsApp would continue to operate independently and even retain its brand. Koum will join Facebook’s board.
This deal suggests that Facebook is continuing to seek out and purchase rival apps and networks as a way to stay relevant with consumers. The social network paid $1 billion in cash and stock in 2012 to buy Instagram, the popular app that allows users to share photos.
In a statement, Facebook said this acquisition supports a shared mission between Facebook and WhatsApp to bring more connectivity and utility to the world by delivering core Internet services efficiently and affordably.
For Facebook, that affordability is only costing $16 billion.
Last November start-up Snapchat turned down a $3 billion offer to be acquired by Facebook. Evan Spiegel, Snapchat’s 23-year-old co-founder and CEO, rejected the deal due to competing interests from other investors, including China’s Tencent Holdings Ltd.
The deal is still pending regulatory approval, but Facebook will still give WhatsApp $1 billion in cash and another $1 billion in stock if the merger is not completed.
In the statement Facebook announced that it was advised by Allen & Company and also received legal advice from Gotshal & Manges. WhatsApp has been advised by Morgan Stanley and it also received legal advice from Fenwick & West.
The news of this deal sent Facebook shares down five percent in after-hours trading, from $68.06 to $64.70 on the Nasdaq, according to Reuters.