Facebook Buys WhatsApp in Whopping $19 Billion Deal
Facebook is becoming the “Big Blue” of Silicon Valley, eating all the smaller startups in its path. The social media giant announced a $19 billion deal to scoop up the messaging platform WhatsApp.
In a statement released late today, Facebook said it is buying Mountain View, Calif.-based WhatsApp for $4 billion in cash and $12 billion worth of Facebook shares. As part of the acquisition, WhatsApp founders and employees will get another $3 billion in Facebook stock that they can cash in after four years.
The massive deal appears to be Facebook's biggest purchase yet. To put it in perspective, even without the $3 billion in Facebook stock that will vest after four years, the deal is 16 times what Facebook paid for photo-sharing site Instagram and more than five times what it offered to pay for messaging service Snapchat.
Both WhatsApp and the internal Facebook messaging system will live on as separate entities.
"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook's founder and CEO, in a statement.
Currently, 450 million people use WhatsApp every month and the internet-based instant messaging service is adding 1 million users each day, according to the statement. What’s especially valuable is that seven in 10 WhatsApp users are active every single day.
“WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide. We're excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world,” said Jan Koum, a co-founder and CEO of WhatsApp. The WhatsApp brand will live on, as will its headquarters in Mountain View.
Facebook, which went public in May of 2012 in a fairly disastrous IPO, has ostracized some of its users in its effort to increase advertising revenues to please investors. Despite complaints, though, more users than ever are spending time on the site.
Facebook’s acquisition of WhatsApp comes just about a month after it snapped up social startup Branch Media, a network that aims to help people connect around their interests.
Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at Entrepreneur.com, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.