Facebook is placing a $19 billion bet on
reaching its next billion mobile users with the acquisition of WhatsApp,
a popular messaging service that lets people send texts, photos and
videos on their smartphones.
The $19 billion deal is by far Facebook’s
largest and bigger than any that Google, Microsoft or Apple have ever
done. But it is likely to raise worries that Facebook and other
technology companies are starting to become overzealous in their pursuit
of promising new products and services, said Anthony Michael Sabino, a
St. John’s University business professor.
“This could be seen as a microcosm of a
bubble,” Sabino said. “I expect there to be a lot of skepticism about
this deal. People are going to look at this and say, ‘Uh-oh, did they
pay way too much for this?”
Facebook, for its part, is taking the long
view. WhatsApp has 450 million monthly users, 70 percent of whom use it
every day. The service is adding a million new users a day. There are 19
billion messages sent and 34 billion received via WhatsApp each day, in
addition to 600 million photos and 100 million video messages.
At this rate, Facebook CEO Mark Zuckerberg is
confident the app will reach a billion users. Services that reach that
milestone, Zuckerberg said in a statement, “are all incredibly
valuable.”
It’s an elite group to be sure — one that includes Google (which owns YouTube), Facebook itself and little else.
Facebook said Wednesday that it’s paying $12
billion in stock and $4 billion in cash for WhatsApp. In addition, the
app’s founders and employees — 55 in all — will be granted restricted
stock worth $3 billion that will vest over four years after the deal
closes.
The transaction translates to roughly 11
percent of Facebook’s market value. In comparison, Google’s biggest deal
was its $12.5 billion purchase of Motorola Mobility, while Microsoft’s
largest was Skype at $8.5 billion. Apple, meanwhile, has never done a
deal above $1 billion.
Facebook’s $1 billion Instagram deal seems
like a bargain in retrospect. Capturing mobile users — and young people —
was a big reason behind Facebook’s 2012 purchase of the photo-sharing
app. Even its reported $3 billion offer for disappearing-message app
Snapchat pales in comparison. Snapchat spurned the bid.
The deal stunned Gartner analyst Brian Blau.
“I am not surprised they went after WhatsApp, but the amount is
staggering,” he said.
The world’s biggest social networking company
likely prizes WhatsApp for its audience of teenagers and young adults
who are increasingly using the service to engage in online conversations
outside of Facebook, which has evolved into a more mainstream hangout
inhabited by their parents, grandparents and even their bosses at work.
WhatsApp also has a broad global audience.
Zuckerberg said the service “doesn’t get as
much attention in the U.S. as it deserves because its community started
off growing in Europe, India and Latin America. But WhatsApp is a very
important and valuable worldwide communication network. In fact,
WhatsApp is the only widely used app we’ve ever seen that has more
engagement and a higher percent of people using it daily than Facebook
itself.”
Blau said Facebook’s purchase is a bet on the
future. “They know they have to expand their business lines. WhatsApp is
in the business of collecting people’s conversations, so Facebook is
going to get some great data,” he noted
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