Facebook to Spend $19 Billion for WhatsApp

FacebookFacebook is going to spend $19 billion on a new acquisition and, this time, it’s WhatsApp. The move led to Blackberry shares rising, as people believe the once-favorite still has some life left in it.

WhatsApp is a popular mobile messaging service for smartphone users. It is available on various brands and models, including the iPhone and Android – the two most popular systems. The benefit for customers involves the ability to send free messages to anyone they have the number for, regardless of the type of phone they have. It takes away the need for iMessaging or Blackberry Messaging, which have limits to their capabilities.

Messages are sent over the internet, so the system uses the data plan already in use. It could end up costing money, should someone not have any free data allowance left. However, in most cases, sending videos, photos and simple messages is completely free. There is a small price of $0.99 per year, but the first year costs nothing, similar to a free trial.

WhatsApp has become extremely popular with the public, and has led to many companies wanting to buy it. Facebook sees it as major competition and continually tries to buy out competition; this was seen during the acquisition of Instagram and the attempted acquisition of Snapchat. The social networking website is attempting to bring more people back to its product and sees this move as a great way to do that.

The shock is that Facebook is willing to spend $19 billion for WhatsApp. This figure is more than the social media site was able to raise in its own IPO, showing the company’s determination to take over. The deal is also 19 times the amount that Instagram was bought for, in 2012, and over six times more than the Snapchat offer, which was made in 2013. The service will be bought by spending $4 billion is cash, $3 billion in restricted stock and the rest in normal stock. The stock amounts will be vested over a period of time.

How did the social networking giant believe WhatsApp was such competition? Within the first five years, the site gained 450 million users. Since then, around a million more people, on average, join on a daily basis; Mark Zuckerberg, the CEO of Facebook, acknowledged this was something nobody had ever been able to do.

Once the deal was announced, Blackberry’s shares rose by nine percent. People now believe that Blackberry’s Messaging Service could still have some worth. It helped that the company chose to create an app for different brands of phones after the Blackberry phone sales started to drop considerably. Blackberry analysts and investors will have to rethink their asset valuation in the company, considering this new Facebook deal works out as $42 per person.

The question many people want the answer to is how will this affect the WhatsApp users? The co-founder of the messaging service, Jan Koum, previously said that monetization was not important to them, downplaying the rumors that advertisements would be added to the service. This is important for Facebook, so WhatsApp users could soon find ads on their service now that the social media giant has agreed to spend $19 billion on it.

By Alexandria Ingham

Sources:

WhatsApp
The Guardian
Reuters

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