Facebook, in a stunning acquisition yesterday, roped in the wildly popular texting application WhatsApp, and dug its claws deeper into the international social networking community. The $19 billion Facebook will pay WhatsApp’s co-creators, Jan Koum and Brian Acton is only equaled by the amount the World Bank annually lends. The two former Yahoo employees will now belong to the elite bracket of people making ten-figure fortunes, according to Forbes.
The deal, which tech pundits are calling Facebook’s boldest move to date, has landed it right at the top of the hierarchy in the Silicon Valley. Through buying its access to WhatsApp’s 450 million users at the moment, Facebook has ensured that it will also gain the million new users WhatsApp adds to its kitty everyday.
According to OnDevice research, WhatsApp is the most popular messaging app for smart phones available in the market. WhatsApp’s resounding success, despite existing messaging giants like Twitter, Microsoft’s Skype and Google, could have posed a serious threat to Facebook’s market. This move has, however, very effectively turned the tables, making WhatsApp a powerful ally.
The deal scores brilliantly on multi-levels for Facebook: the social networking site will now be able to squarely seat itself at the center of its users’ lives. But more importantly, Facebook can now reposition itself amidst its younger users, who seemed to be leaving its platform for mostly WhatsApp and a few other instant messaging apps.
According to a Forbes estimation, WhatsApp’s Chief Executive Officer Jan Koum is now worth $6.8 billion and co-founder Brian Acton is worth at least $3 billion thanks to their deal with Facebook. The estimations are based on Facebook’s closing share price on Wednesday. The deal will be closed with Facebook, paying them with around 184 million shares and nearly 46 million Restricted Stock Units (RSUs) as well as $4 billion in cash. The $19 billion paid by Facebook for its new acquisition is also the same amount that is lent annually by the World Bank.
Facebook CEO Mark Zuckerberg, speaking over a conference call, said that nobody in the world’s history has achieved anything close to WhatsApp’s soaring popularity. The five-year old company, said Zuckerberg, is on its way to one billion users and that it would operate independently like his previous acquisition Instagram. Services that reached the one billion milestone “are all incredibly valuable,” according to him. For the moment, Facebook will allow WhatsApp to concentrate on beefing up its user base, rather than trying to extract its money from the messaging app’s existing users. The deal dealt a massive blow to Google, which last year made an unsuccessful $1 billion dollar bid to acquire WhatsApp.
Allaying fears that Facebook may introduce advertisements into the WhatsApp user interface, Zuckerberg said on Wednesday evening that he personally did not subscribe to the idea of using ads to monetize messaging platforms. The stand-alone Facebook messenger app, which is only second in popularity to WhatsApp, contains no ads either.
Though talks regarding this landmark merger cropped up only about 12 days ago, Zuckerberg and Koum are no strangers. The Facebook CEO wrote earlier today on his Facebook page that he has known Koum for a long time and that he knew both shared the vision of making the world more open and connected. The deal will also place Koum on the board of Facebook where, according to Zuckerberg, they will shape the future of Facebook as well as WhatsApp.
The deal, which could very well be one of this year’s largest, has completely dwarfed the social networking site’s previous acquisition of Instagram for $1 billion. The $19 billion that Facebook will be paying WhatsApp’s founders and employees is only equaled by the World Bank’s annual lending amount.
By Aruna Iyer