Facebook Buys WhatsApp for $19 billion

Facebook Buys WhatsApp for $19 billion

Facebook yesterday added another global brand and 450 million new users to its growing collection of social media properties when it agreed a $19 billion cash and stock deal for fast growing, five-year old startup WhatsApp. 

WhatsApp is a text, image, video and voice messaging service and while it may not be well known in the U.S. it is huge globally. Adding over one million new users a day, WhatsApp is growing faster than any other social network and is growing faster than Facebook did in it’s early days. 

“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” Facebook CEO Mark Zuckerberg said in the announcement. 

The deal consists of $4 billion in cash, $12 billion in Facebook stock and $3 billion in restricted stock units that will vest over four years for WhatsApp’s 55 employees. Sequoia Capital stands to make a huge windfall as it funded much of WhatsApp’s startup growth. This is the largest deal of a venture backed startup according the Dow Jones VentureSource. 

Zuckerberg said on his personal Facebook page that, “WhatsApp will continue to operate independently within Facebook. The product roadmap will remain unchanged and the team is going to stay in Mountain View. Over the next few years, we’re going to work hard to help WhatsApp grow and connect the whole world.” This mirrors the strategy Facebook employed after it purchased the much smaller Instagram in Sept, 2012 for $1 billion. Instagram remains independent today. 

WhatsApps numbers are staggering. Doubling in size this past year, 70 percent of its 450 million users use the application every day and 500 million images, 200 million voice messages, and 100 million videos are exchanged daily on WhatsApp. The company said that users sent 18 billion messages and received 36 billion messages on December 31 – a total three times larger than the year before.

WhatsApp co-founder and CEO Jan Koum will join the Facebook Board and said, “we want to be the communication platform of the 21st century” does not believe in using advertising to provide revenue. He has a sign on his desk that says, “No Ads!, No Games!, No Gimmicks!” and believes ads mar the users experience.

Facebook closed yesterday at 68.06, up 0.76 or 1.13 percent. It’s closing market cap was $167.29B.

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