Facebook to buy messaging app WhatsApp for $19 billion

“Facebook Inc., the world’s largest social network, agreed to purchase mobile-messaging startup WhatsApp Inc. for as much as $19 billion in cash and stock, the biggest Internet acquisition in more than a decade,” Sarah Frier reports for Bloomberg. “The accord includes $12 billion in stock, $4 billion in cash and $3 billion in restricted shares, Facebook said yesterday in a statement. ”

“It’s the largest Internet deal since Time Warner’s $124 billion merger with AOL in 2001, according to data compiled by Bloomberg. WhatsApp has more than 450 million members, with 1 million users being added daily,” Frier reports. “Facebook Chief Executive Officer Mark Zuckerberg, who bought photo-sharing service Instagram for about $700 million in 2012, has been adding applications such as messaging and news to court smartphone and tablet users. WhatsApp, which would be the company’s biggest acquisition, competes with apps from Twitter Inc., Kik Interactive Inc. and Snapchat Inc., the photo-message startup that rebuffed a $3 billion Facebook bid last year.”

“The deal prices WhatsApp at more than half the $31.5 billion market value of microblogging service Twitter, which has 241 million active users,” Frier reports. “‘Facebook is clearly taking out one of its main competitors,’ Paul Sweeney, a Bloomberg Industries analyst, said in an e-mail. ‘They are buying 450 million loyal users and an extraordinary growth story, but at a staggering cost.'”

Read more in the full article here.

Fortune’s Jessi Hempel reports, “Google offered to buy WhatsApp for $10 billion.”

Full article here.

MacDailyNews Take: $19 billion is a lot of money.

28 Comments

    1. 450 million members = $450,000,000 / year

      $19 billion / $450,000,000 = 42 years to break even.

      And that doesn’t include the drop in Facebook stock after this stupid deal was announced.

      Sure, WhatsApp is supposedly adding 1 million users per day, but I bet that dies off now that Facebook owns it, not to mention the numbers of people who will simply drop immediately.

    2. I can make no economic sense of this purchase. Facebook just paid the equivalent of two years of its REVENUE for an acquisition that has 450,000,000 users, most of whom signed up for free and who, if they continue will pay at most 99¢ a year and will run like rats from a sinking ship to the next bigger and newer thing at the first sign of an advertisement on their ‘free’ messages. Where’s the monetization that will pay Facebook their investment back before the trump of doom???? I don’t see it. $19 billion dollars?? For what??? If I were an investor in Facebook right now, I would be screaming bloody murder and filing a stockholder lawsuit against Zuckerberg for this waste of my equity!!!!

  1. Some friends have already deleted the app. If they wanted to use a FB-aligned chat client, they’d be using FB messenger already. They have no illusion that Whatsapp discussions were truly private, but there’s something to be said about separation of info aggregators

  2. “It’s the largest Internet deal since Time Warner’s $124 billion merger with AOL in 2001…”

    Yep, and it is likely to be just about as good of a bargain. When you consider Facebook’s difficulties in monetizing its own ecosystem, you have to wonder how successful Facebook will be in monetizing its recently acquired assets. My guess? Future write downs of quite a few $B.

    Apple has around $150B in cash and securities because it does not squander its assets on big acquisitions. Apple gets much more out of its myriad sub-$B acquisitions that fit into its strategic plan. Apple does not just slap on new divisions and hope for the best.

    Apple’s recent investment in synthetic sapphire production represents only about 1/36 (2.8%) of Facebook’s purchase of WhatsApp, but I am willing to bet that it will end up producing $B in profit and a very healthy ROI for Apple. Major acquisitions like WhatsApp, Skype, Motorola Mobility, AOL, etc., tend to produce sub-par results.

  3. They paid $19B (some outlets are saying $16B). Either way: insanity. Sure whatsApp has 450 million users. FB just paid $42.22 for each user. If they double their user base to 900 million, and they get every single one of them to pay a dollar a year for the service (right now the app costs 99 cents after -2 months of use), it would take 21 years to get there money back. The problem with FB is that these kids just don’t know the value of money.

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