Facebook has announced the purchase of mobile messaging service Whatsapp in a deal worth $19 billion, representing the company’s largest ever acquisition. Mark Zuckerberg, founder of Facebook, described the deal by saying Whatsapp is an “incredibly valuable” that was on the way to connecting over one billion people around the world. The deal could represent a big gamble for Facebook which has struggled with its strategy for mobile users.Whatsapp currently has over 400 million users around the world and reports it is adding new users at a rate of one million a day. The service allows users to send unlimited free text messages and pictures to other users of the app over a 3G or internet connection and is among the world’s most downloaded app.
This successful bid from Facebook comes on the back of a $1 billion bid made by Google last year that was turned down. Zuckerberg was delighted with his acquisition saying “Whatsapp is on the path to connect 1 billion people. The services that reach this milestone are all incredibly valuable”, he went on to mention his relationship with Jan Koum, founder and CEO of Whatsapp, “I’ve known Jan for a long time and I’m excited to partner with him and his team to make the world more open.”
The purchase will be made up with a mix of Facebook stock and cash. Whatsapp will reportedly receive $12 billion in Facebook shares, $4 billion in cash and an additional $3 billion which will be paid out in restricted shares to executives at a later date. The company’s structure is unclear but it is believed Whatsapp employed fewer than 100 people, all of whom will become incredibly rich.
This acquisition comes amidst a battle between tech firms to build their mobile businesses. Last year, Facebook made an unsuccessful $3 billion bid for Snapchat, a service that allows users to exchange messages that erase themselves after a short period. By purchasing Whatsapp, Facebook have acknowledged there is a shift in the way people connect and believe this could be the new generation of messaging services.
This latest purchase marks a latest new height in the ever increasingly frenzied tech scene. On Tuesday it was announced Candy Crush Saga would float on the stock exchange valuing the game at more than $5.5 billion. Last month Google forked out $3.2 for Nest, makers of smart home appliances.
Facebook had faltered in May 2012 after its share sale and analysts had predicted the company would fall behind competition as users moved to mobile. Since then it has recovered and put emphasis on building up its mobile business but has been warned that teenagers are cooling on its services. Whatsapp is especially popular with a younger audience and Facebook hopes that it will can recapture that audience to become a major player in that space.
Social messaging services such as Whatsapp, WeChat and Snapchat are increasingly being used for other services, in China for example the services have been linked to bank accounts and can be used to make purchases in stores or restaurants including McDonalds. In India Whatsapp is being used by doctors to instantly send electrocardiogram pictures of patients who’ve suffered heart attacks, potentially saving lives.