Facebook to buy WhatsApp for 19 billion dollars -- but why?

WhatsApp messenger has gained quite the following. This is kind of surprising though, as services like Google Hangouts and iMessage already exist. I've never understood the allure of the service, outside the potential for "free" messages if someone does not have an unlimited text plan. I can't imagine that is too many people -- after all, many carriers offer inexpensive unlimited texting. The most glaring negative is that the other party has to install the app too. Why not just use Google Hangouts? Or Skype? Or Facebook Messenger?

Yes, Facebook already has a messenger protocol and a dedicated messenger app. It is pretty good too, it offers read receipts and locations -- I use it quite a bit. With that said, Facebook announces it is purchasing WhatsApp for a staggering 19 billion dollars. Wait -- what!?

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"Facebook today announced that it has reached a definitive agreement to acquire WhatsApp, a rapidly growing cross-platform mobile messaging company, for a total of approximately $16 billion, including $4 billion in cash and approximately $12 billion worth of Facebook shares. The agreement also provides for an additional $3 billion in restricted stock units to be granted to WhatsApp's founders and employees that will vest over four years subsequent to closing", says the social media network.

Mark Zuckerberg says, "WhatsApp is a simple, fast and reliable mobile messaging service that is used by over 450 million people on every major mobile platform. More than 1 million people sign up for WhatsApp every day and it is on its way to connecting one billion people. More and more people rely on WhatsApp to communicate with all of their contacts every day".

Again, WhatsApp duplicates the functionality of the existing Facebook Messenger. And so, if my math is correct, Facebook is essentially buying 450 million new messenger users at $42/head. Of course, that likely includes users who already use WhatsApp and Facebook Messenger simultaneously. In other words, Facebook is probably buying a good portion of user accounts that belong to people that are already on its service -- duplicates. With duplicates removed, the per head price is likely far higher.

"WhatsApp will remain autonomous and operate independently. You can continue to enjoy the service for a nominal fee. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using. And you can still count on absolutely no ads interrupting your communication. There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product", says WhatsApp co-founder, Jan Koum.

While Facebook and Instagram have coexisted relatively independently, it remains to be seen if the same can happen here. After all, the two acquisitions are very different beasts. However, the real question is, will the 19 billion dollars ever be recouped? Another messaging service fad can come along tomorrow, and take it all away.

Do you think Facebook overpaid? Tell me in the comments.

Image Credit: Artem Samokhvalov/Shutterstock

21 Responses to Facebook to buy WhatsApp for 19 billion dollars -- but why?

  1. I just hope with this Whatsapp now works correctly, it is not very reliable, at least outside the states.

    • Marcos Vinícius says:

      What the hell are you talking about? WhatsApp is a great messenger! But it depends on what platform you're using it. It runs fine on Android, at least for me.
      Even on Brazil (my country), it is very reliable.

  2. DarthVeda says:

    This is kind of surprising though, as services like Google Hangouts and iMessage already exist.

    You do know that there are other countries other than US, right? Whatsapp is heavily used by users in Europe and Asiapacific. Not everyone will have unlimited texting in their plan and it is quite expensive, and group chat isn't an option for texting. Whatsapp only requires registration through the phone and doesn't ask you to sign up with your email and for any other requests..it's simple and yet provides lot of options, so now you know why it has so much popularity

    • Kenton Douglas says:

      WhatsApp needs your mobile number. Facebook has just acquired 450 million phone numbers (and growing fast), which it can mine using cross-analytics and location data for advertising revenue on it's other apps, or those in it's advertising network.

  3. Benni Bennetsen says:

    This shows people forgot about the it boble and de are repeating the errors og the past.… too much, too late!

  4. AntiFB says:

    Brian, Noth Ameria != the known universe.
    LOTS of users worldwide don't have or cannot afford unlimited text plans. Plus, can you exchange images, sound files, videos, voice messages via SMS/Text ? No. There is a huge market for WhatsApp.

    Watch FaceBook screw this up...

    • Fair enough, but again, they already have Facebook Messenger. Any feature that it is lacking, and whatsapp has, can be added to it for less than 19 billion dollars! They aren't buying the service, they are buying people

      • Zootopia3000 says:

        Buying 'active' people to replace the inactive ones on Facebook. Just like with AOL, buying up software and then mucking the software up, so shall Facebook, and FB will lose even more users as they go elsewhere again.

      • lvthunder says:

        Yeah Facebook is buying people. They are buying the employees of the company not necessarily the users of the app.

    • Johnny says:

      Actually you can, its called MMS and is part of the protocol. And if you can't afford or get unlimited text now that your using data for all that communications does that mean you have unlimited data?

  5. toddh says:

    Young people use it, the same ones that are moving away from Facebook. They want that user base.

  6. Preben Nielsen says:

    Someone at Facebook does not know the value of money. Sad.......

  7. pmdci says:

    " I've never understood the allure [...]"

    That's a first...

  8. async2013 says:

    Facebook struggling to show growth internally this will make the markets look down on facebook even more. Oh well whatsapp has just been added to facebook as non usable anymore

  9. Eric Sleeper says:

    I miss the old days when a billion was a lot.

  10. chinch987 says:

    "I can't imagine that is too many people -- after all, many carriers offer inexpensive unlimited texting. "
    Really? You can't imagine people on WIFI only? OK, first think of the market for kiddies with ipod touch or kindle fires (no SMS/MMS capability). Next add adults not on "unlimited plans" which is many, many people with iPhones but 200 txt limit on Verizon. Next see kids given (forced to buy based on cost) smartphones but with data turned off thus no MMS.
    While Kik is very, very popular around her for tweens it doesn't take much imagination to see that people want messaging independent of their PHONE #.

  11. Samwise Galenorn says:

    My only experience with WhatsApp is that email from them goes directly to my junk folder.

  12. TheRecklessWanderer says:

    Giving facebook your cell number is such a bad idea. Now a bunch of people have no choice, but if they are kids, they probably don't care anyway.

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