Facebook will acquire smartphone messaging leader WhatsApp

Facebook buys WhatsApp in a bid to win 'Facebook Nevers'

Facebook will acquire mobile-messaging start-up WhatsApp for $19bn (£11.4bn) as it aims at getting a greater deal of the mobile communications market and attracting younger users.

The deal, reportedly negotiated just 10 days ago when Facebook’s CEO Mark Zuckerberg met with WhatsApp’s chief Jan Koum over dinner, will see the current mobile messaging number one WhatsApp continue operating independently and keep its non-advertising policy.

Silicon-Valley-based WhatsApp, founded by Ukrainian emigrant in the US and college drop-out Jan Koum and Stanford University alumnus Brian Acton, has over 450 million users and has been growing by one million users every day.

"No one in the history of the world has ever done something like this," Facebook chief executive Zuckerberg said during a conference call on Wednesday.

The transaction, involving $4bn in cash, $12bn in stock and $3bn in restricted stock is worth more than Facebook raised in its own IPO.

Acquiring WhatsApp would provide Facebook with a pathway to lure new users to its own platform, especially teenagers that have so far been reluctant to join Facebook, perceived to be a network of the generation of their parents.

WhatsApp is a free app, only making money from a $1 annual fee that is not charged during the first year of use.

“All app types rise and fade, so established social media formats like Facebook will be overtaken by something new, and picking up candidates that might have ultimately replaced them may be a good survival strategy for a while,” Professor Will Stewart from the IET commented on the news.

“Obviously WhatsApp adds instant messaging to Facebook, which must strengthen their position for the moment. This does show the growing significance of mobile, though of course Facebook is on mobile anyway.”

Eden Zoller, principal analyst of consumer telecoms at Ovum, commented: “The social messaging market is growing rapidly, with messaging volumes to reach 69 trillion with subscribers growing to 1.8 billion by the end of 2014 according to Ovum forecasts. An immediate benefit to Facebook in the WhatsApp acquisition is that it has enabled two strong social messaging players to be on the same team.”

Further info: Putting a price on Facebook's 'paranoia' - how about $19bn? by Paul Dempsey

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