Facebook is buying WhatsApp, agreeing to pay $19 billion in cash and stock for the popular smartphone messaging service.
Revealed today in a filing with the Securities and Exchange
Commission, the deal is Facebook’s largest acquisition to date, but it’s
just the sort of move the company was expected to make. The social
networking giant has been quietly exploring the use of WhatsApp and other messaging services popular among teens,
a demographic where Facebook’s influence has begun to wane. Recently,
the company failed in its efforts to acquire another of these
teen-centric services, SnapChat, and it has now filled the gap with
WhatsApp.
On a recent earnings call, Facebook admitted that teens are spending
less time on its service, and a tool like WhatsApp is a way of pushing
this trend in the other direction. Facebook offers its own messaging
services for smartphones — including a SnapChat clone — but WhatsApp
gives it instant access to a new and relatively large group of
youngsters who are actively messaging each other on a daily basis.
According to Facebook, the service now spans 450 million monthly users,
and about 70 percent of those are active on any given day.
The deal is Facebook’s largest acquisition to date, but it’s just the sort of move the company was expected to make
According to the SEC filing, Mark Zuckerberg and company will acquire
all outstanding stock and options in WhatsApp for about $4 billion in
cash and 183 million Facebook shares, which are currently worth about
$12 billion. The deal also includes an additional $3 billion in stock
that will go to the founders and employees of WhatsApp. Jan Koum, the
WhatsApp co-founder and CEO, will join the Facebook board.
“WhatsApp is on a path to connect 1 billion people. The services that
reach that milestone are all incredibly valuable,” read a statement
from Zuckerberg. “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.”
Facebook is by far the world’s most popular social network, with over
1.2 billion users worldwide. But if Zuckerberg and crew are to retain
their hold on the world — and continue to expand its efforts to serve
ads to all those people — they must continue to evolve with the
ever-changing tastes of the teenage set. For this reason, the company
won’t fold WhatsApp into its existing service.
As it has done with the photo-sharing site Instagram — another recent
purchase — Facebook will continue to operate WhatsApp as a largely
standalone service, under the existing WhatsApp name. That’s what the
company said in its press release, but more importantly, it’s the best
way to retain the young set of users the company has just paid so much
for.
In many ways, WhatsApp’s breed of smartphone messaging is “the killer
app,” something that can capture the attention of users no matter where
they are or what else they’re doing. And ultimately, services like this
can be great place to serve ads. For Facebook, the trick is to find
subtle yet effective ways of dovetailing myriad smartphone apps with its
larger service, of eventually bringing teens and others into the larger
fold.
It’s a trick the company must learn well. Increasingly, the world is
moving away from sites like Facebook.com and towards a wide range of
applications loaded onto mobile phones. Clearly, Facebook recognizes
that its future lies with tools like WhatsApp. Now, the task is to make
it happen.
