In a play to dominate messaging on
phones and the Web, Facebook has
acquired WhatsApp for $19 billion.
That's a stunning sum for the five-year
old company. But WhatsApp has been
able to hold its weight against
messaging heavyweights like Twitter
(TWTR), Google (GOOG, Fortune 500)
and Microsoft's (MSFT, Fortune 500)
Skype. WhatsApp has upwards of 450
million users, and it is adding an
additional million users every day.
Referring to WhatsApp's soaring growth,
Facebook CEO Mark Zuckerberg said on
a conference call, "No one in the history
of the world has done anything like that."
WhatsApp is the most popular messaging
app for smartphones, according to
OnDevice Research.
Buying WhatsApp will only bolster
Facebook's already strong position in the
crowded messaging world. Messenger,
Facebook's a standalone messaging app
for mobile devices, is second only to
WhatsApp in its share of the smartphone
market.
Related: 5 key moments that changed
Similar to traditional text messaging,
WhatsApp allows people to connect via
their cellphone numbers. But instead of
racking up texting fees, WhatsApp sends
the actual messages over mobile
broadband. That makes WhatsApp
particularly cost effective for
communicating with people overseas.
That kind of mobile messaging services
have become wildly popular, with twice
as many messages sent over the mobile
Internet than via traditional texts,
according to Deloitte. But most of the
messaging industry's revenue is still
driven by text messaging.
On the conference call, Facebook said it
is not looking to drive revenue from
WhatsApp in the near term, instead
focusing on growth. Zuckerberg said he
doesn't anticipate trying to aggressively
grow WhatsApp's revenue until the
service reaches "billions" of users.
WhatsApp currently charges a dollar a
year after giving customers their first
year of use for free. WhatsApp CEO Jan
Koum said on the conference call that
WhatsApp's business model is already
successful.
That indicates Facebook bought
WhatsApp to add value to its existing
messaging services, as well as for the
long-term potential of the company.
Facebook bought Instagram for $1 billion
in 2012 for similar reasons: As young
social network users gravitated towards
photo-sharing, Facebook wanted to
scoop up what could have eventually
become a big rival.
Like Instagram, WhatsApp will function
as an autonomous unit within Facebook,
with all the existing employees coming in
as part of the deal.
Facebook (FB, Fortune 500) said it will
pay WhatsApp $4 billion in cash and $12
billion in stock. 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. Koum will also join
Facebook's board of directors. To top of
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