Facebook Buys WhatsApp for $19 Billion

facebook-whatsappIt feels as though I’m talking a lot about money and tech this week so why not combine the two. Earlier this week, Facebook announced that they were buying popular cross-operating system instant messaging app WhatsApp for a jaw-dropping $19 billion.

As far as small tech companies go, this purchase is by far the biggest that has been made in recent memory. Two years ago, Microsoft bought Skype for $8.5 billion which is less than half of what Facebook valued WhatsApp. Last year, Facebook bought Instagram for $1 billion and Snapchat turned down a $3 billion offer which actually seems like a good idea considering WhatsApp’s value.

The deal will see Facebook pay WhatsApp’s owners $4 billion in cash and $12 billion in Facebook stock. WhatsApp founders and staff are also due to be paid $3 billion in shares if they are still employed by Facebook/WhatsApp in four years’ time. While the shares likely won’t be divided evenly among WhatsApp’s 55 employees, that averages out to $54.5 million in stock for each employee.

According to the Wall Street Journal, on a per-user basis, Facebook’s price is actually not ludicrously high. They say that the price of $40 per user is inline with recent tech company purchases.

For those unfamiliar with WhatsApp, it may seem like a little messaging service but actually boasts 450 million users. These users get a year of free service upon activation but pay $0.99 per year for each subsequent year of use. That annual subscription fee is the app’s only source of revenue.

It’ll be interesting to see the direction that Facebook sets for WhatsApp. They bought the company because of its quickly growing user base and high daily engagement rate. What WhatsApp doesn’t have is a monetization policy to capitalize on that engagement because they don’t believe in in-app advertising in their product. However, that’s how Facebook makes money. They’re even introducing ads to Instagram. The biggest challenge for Facebook might be changing the culture at WhatsApp to accept ads in the product.

Since I’m not a WhatsApp user and haven’t been an active Facebook user in three years, I have no idea whether this purchase actually benefits anyone besides WhatsApp’s owners. Anyone reading have an opinion as to whether this is a good thing for you or not?

Sources: Wall Street Journal (1), Wall Street Journal (2), CNN Money

About Steve Murray

Steve is the founder and editor of The Lowdown Blog and et geekera. On The Lowdown Blog, he often writes about motorsports, hockey, politics and pop culture. Over on et geekera, Steve writes about geek interests and lifestyle. Steve is on Twitter at @TheSteveMurray.

Posted on February 21, 2014, in Tech and tagged , , , . Bookmark the permalink. 1 Comment.

  1. Reblogged this on 06cedmuho.

    Like

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: