Facebook buys WhatsApp for $19bn – with founders and staff sharing $3bn

By Graeme Burton
20 Feb 2014 View Comments

Facebook is acquiring messaging company WhatsApp in a deal that values the fast-growing company at $19bn.

Facebook is paying $4bn in cash with the balance paid in Facebook shares. The company's founders and employees will share $3bn of the shares as restricted stock that will vest over four years - a strategem intended to make sure they stay to ensure a smooth handover.

Further reading

Founded in 2009, WhatsApp is the fastest growing social media platform ever - growing faster in its five years than Facebook, and other popular social media companies. It claims to have some 450 million monthly users, with 70 per cent of those active on any given day, according to Facebook, making it more popular than Skype, We Chat and BlackBerry Messenger.

It is particularly popular among young people and immigrant populations around the world because it enables people to communicate while avoiding mobile charges.

The deal, announced late last night, values WhatsApp users at around $42 per active user. WhatsApp will "continue to operate independently and retain its brand", according to Facebook.

"WhatsApp will complement our existing chat and messaging services to provide new tools for our community," wrote Facebook founder Mark Zuckerberg in a blog posting.

He continued: "Facebook Messenger is widely used for chatting with your Facebook friends, and WhatsApp for communicating with all of your contacts and small groups of people. Since WhatsApp and Messenger serve such different and important uses, we will continue investing in both and making them each great products for everyone."

It comes after WhatsApp surpassed Facebook as the messaging platform of choice, particularly in emerging markets, due to its directness. In particular, WhatsApp is more popular than BlackBerry Messenger, which BlackBerry converted into a free app last year in a bid to capture some of WhatsApp's fast-growing market.

Zuckerberg claimed that WhatsApp is "on a path to connect 1 billion people", although metrics suggest that the overlap between Facebook users and WhatsApp users is only about 25 per cent.  

Instead of advertising, WhatsApp is sold as a free app, costing an additional $1 or 69 pence per year for unlimited use - a sum that would raise just £300m from its current user base. Facebook will therefore have to look at options to both increase its number of users still further, as well as how to "monetise" that user base.

The deal may also raise privacy concerns among users. The company has already been subject to a privacy probe in North America due to the way in which it uploads users' address books to WhatsApp's servers as part of a facility to enable them to quickly and easily add users to their WhatsApp address books.

The facility effectively stores the contact details of people who aren't even WhatsApp users on the company's servers. The probe has examined the way in which these details were stored and the privacy implications of such a service.

Facebook, meanwhile, looks set to become "the" social network of the internet, sucking up every last detail of people's lives.

WhatsApp provides instant messaging apps for iOS, Android, BlackBerry, Windows Phone, Nokia Series 40 and even Symbian.

Economist Andrew Sentance, commenting on Twitter, suggested that the high value placed on the company had all the hallmarks of a classic "bubble". "Enormous values paid for intangible & speculative assets - looks like a bubble to me," he tweeted.

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