Facebook buys WhatsApp for $19 billion in tech world's largest buy

The world's biggest social networking company said Wednesday that it is paying $12 billion in Facebook stock and $4 billion in cash for WhatsApp.

hidden February 20, 2014 12:42:53 IST

Facebook is buying mobile messaging service WhatsApp for $19 billion in cash and stock, by far the company's largest acquisition and bigger than any that Google, Microsoft or Apple have ever done.

The world's biggest social networking company said Wednesday that it is paying $12 billion in Facebook stock and $4 billion in cash for WhatsApp. In addition, the app's founders and employees — 55 in all — will be granted restricted stock worth $3 billion that will vest over four years after the deal closes.

In a filing to the Security and Exchange Commission (SEC), Facebook announced the acquisition.

"The acquisition supports Facebook and WhatsApp's shared mission to bring more connectivity and utility to the world by delivering core internet services efficiently and affordably. The combination will help accelerate growth and user engagement across both companies," the filing stated.

"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO. "I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."

The company also announced that WhatsApp's cofounder and CEO Jan Koum would join Facebook's board of directors.

Facebook buys WhatsApp for 19 billion in tech worlds largest buyFacebook on Wednesday, announced that it will acquire the popular cross-platform mobile messaging company, WhatsApp for $19 billion.

The deal translates to roughly 9 percent of Facebook's market value. In comparison, Google's biggest deal, Motorola Mobility, stood at $12.5 billion, while Microsoft's largest was Skype at $8.5 billion. Apple, meanwhile, has never done a deal above $1 billion.

In a separate blog post on the WhatsApp site, Koum said that the partnership with Facebook "will give WhatsApp the flexibility to grow and expand".

"WhatsApp will remain autonomous and operate independently. You can continue to enjoy the service for a nominal fee. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using. And you can still count on absolutely no ads interrupting your communication," he said.

The price stunned Gartner analyst Brian Blau. "I am not surprised they went after WhatsApp, but the amount is staggering," he said.

Facebook likely prizes WhatsApp for its audience of teenagers and young adults who are increasingly using the service to engage in online conversations outside of Facebook, which has evolved into a more mainstream hangout inhabited by their parents, grandparents and even their bosses at work.

"This is a bet on the future for Facebook," Blau said. "They know they have to expand their business lines. WhatsApp is in the business of collecting people's conversations, so Facebook is going to get some great data."

In that sense, the acquisition makes sense for 10-year-old Facebook as it looks to attract its next billion users while keeping its existing 1.23 billion members, including teenagers, interested. The company has said it will develop a "multi-app" strategy, creating its own applications that exist outside of Facebook and acquiring others.

"Facebook seems to be in acknowledgement that people are using a lot of different apps to communicate," said eMarketer analyst Debra Aho Williamson. "In order to continue to reach audiences, younger in particular, it needs to have a broader strategy...not put all its eggs in one basket."

Facebook said it is keeping WhatsApp as a separate service, just as it did with Instagram, which it bought for about $715.3 million in two years ago.

WhatsApp has more than 450 million monthly active users. In comparison, Twitter had 241 million users at the end of 2013.

Facebook CEO Mark Zuckerberg says WhatsApp is on path to reach a billion users.

"The services that reach that milestone are all incredibly valuable," Zuckerberg said.

WhatsApp, a messaging service for smartphones, lets users chat with their phone contacts, both one-on-one and in groups. The service allows people to send texts, photos, videos and voice recordings over the Internet. It also lets users communicate with people overseas without incurring charges for pricey international texts and phone calls. It costs $1 per year and has no ads.

The deal is expected to close later this year.

Shares of Menlo Park, California-based Facebook slid $1.12 to $66.94 in extended trading after the deal was announced.

Associated Press with inputs from Arlene Chang/Firstpost

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