Facebook to Acquire WhatsApp

This has to be about users and not technology, resources or anything else…

I saw this the other day and it really made my jaw drop. I wasn’t surprised that Facebook made the acquisition. I was surprised at how much Facebook paid for the organization. The total deal is worth $19B – $4B in cash, $12B in stock and $3B in restricted stock for the founders and other employees.  The restricted shares vest over period of four or so years.  The deal also provides WhatsApp founder Jan Koum with a seat on Facebook’s Board of Directors.

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WhatsApp is an instant messaging app that sends messages over a data connection as opposed to GSM or CDMA.  Because the app sends text messages as data over your smartphone’s data connection, they don’t count against your text messaging limit.  The app claims to have over 450M active users, and is signing up users at the rate of one million a month.  That’s a lot of users…

WhatsApp is similar to Apple’s iMessages platform which sends text messages via an iPhone’s data connection and not a cellular connection to avoid being double charged for the message.

Google also made an offer of $10B for the company, but was ultimately turned down.  Google wanted to make certain that it didn’t get surprised with the WhatsApp deal as it did with Instagram when Facebook snatched it out from under them in 2012.  They were so determined to insure that this didn’t happen that they were willing to pay millions for to WhatsApp in what’s being called a “right of notice” offer. I can’t find out if that agreement was actually consummated or not.  However, Google wanted the right to be notified if another company entered into acquisition talks with WhatsApp; and again, they were willing to pay millions for that. In this case, it likely would have been a waste of money for Google.  Facebook’s offer was nearly double what Google had proposed.

From what I’ve been able to see so far, Facebook plans to leave WhatsApp alone. They did the same thing with Instagram when they acquired them in 2012. They purchased the asset, with the intent of doing – something – with it later.  What that is, and how Facebook might actually make money from or with that asset has yet to be determined.

When I heard about this, I thought, “well, WhatsApp is going to be the new Facebook Messenger,”  but that doesn’t seem to be the case. Facebook Messenger, Facebook’s own text messaging app, isn’t going anywhere.  Some analysts think the acquisition supports Facebook’s strategy to be dominant in the mobile world.  They want to be a go-to company for mobile apps and messaging, especially in emerging markets.  Some analysts thing this is a survival tactic.  WhatsApp is strong in Europe and South America, where it enjoys approximately 80% market penetration in countries like Brazil, Germany, Portugal and Spain.  It is, in fact, the largest mobile messaging service in India, Brazil, Mexico, Nigeria and South Africa, according to Engadget.

What do you think? Is this a good buy for Facebook?  Will WhatsApp really continue to function independently as Instagram does, or will Facebook actively try to do something with the app sooner rather than later?  I’d really like to hear what everyone else thinks.  Why don’t you give me your thoughts on the matter in the discussion area, below?

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