Facebook bought WhatsApp for $19 billion after the popular messaging app turned down Google’s $10 billion offer. However, reportedly money was not the only issue for CEO of the messaging app, Jan Koum.
Many companies want to take over the smaller, often more successful ones and taking over the messaging app was no exception. In the first five years that WhatsApp has been on the market, the number of users has grown to an amazing 4.5 million. The company reports that a million more are using the app on a daily basis on average. Even Mark Zuckerberg, CEO of Facebook, had to admit that it was something no other company has ever been able to do.
According to Fortune, two unnamed sources stated that Facebook was not the only company wanting to take over the small business. Google also wanted in and offered just short of double less than the social media giant was willing to pay. However, it was the lack of board of directors’ seat that caused Koum to turn the company’s offer down.
Koum wanted to remain on the board of directors for the app to oversee the direction the company would eventually take. Facebook was more than willing to offer this, as well as the extra $9 billion through a mixture of cash, stock and restricted stock. Google has refrained from commenting about the situation and the leak from the sources.
This isn’t the first time that Google has reportedly offered to buy WhatsApp, although the first time was 10 times less than the reported $10 billion this time. Last year, the messaging giant quickly dispelled rumors that it was in negotiations to sell the company to Google for just $1 billion. Coincidentally, this is the same amount that Facebook bought Instagram for back in 2012.
Why would any company offer WhatsApp billions of dollars when the company’s focus was never on monetizing it? It all comes down to the potential. Facebook saw the potential of the app gaining a billion users over the next couple of years, considering the continued popularity at the moment. The app has gained almost double the amount of users that Twitter currently has, and Twitter is completely free and just as quick to use.
The deal is bigger than any other company has done. Apple’s deals to acquire companies have never breached the $1 billion mark, while Microsoft gained Skype for $8.5 billion. Google has been known to offer more than reportedly offered to WhatsApp, when it paid $12.5 billion for Motorola Mobility.
Decisions to go after the messaging app company has never surprised analysts, but the amount that Facebook eventually paid for it did, and it is not just the founders who benefit. Three billion dollars of the total amount, which will be in restricted stock, will be paid to all 55 founders and employees. This amount will be vested over the period of four years once the deal finally closes. Google and its employees definitely missed out if it really did only offer $10 billion and no board of directors’ seat to WhatsApp CEO Koum.
By Alexandria Ingham