Facebook Buys WhatsApp; Why such a Big Spending on WhatsApp

Facebook has snapped up WhatsApp. In the same fashion it gulped down Instagram last year, Facebook has cuddled yet another big and emerging market rival. With the deal, which is worth of a confounding $19 Billion, the social media giant has joined an ever-growing list of ravenous tech firms that muted their threatening competitors through lavish takeovers.

For Biggest Payout Ever

Takeover of small tech firms by giants is no news at all. It happens now and again. But Facebook’s huge spending to acquire the mobile messaging app is a bit bewildering for many. Google threw out such a big sum to mesh with a team led by Jan Koum, founder of WhatsApp that might otherwise turn out to be a big distraction for Marc Zuckerberg.

It is the biggest acquisition of the social media company ever. Zuckerberg made a whopping deal to own a company that Google estimated to have a value of $1 billion last year. The Facebook CEO has his reason for such a deal, though. Unraveling his firm’s decision, he noted that the 5-year-old messaging app was an “incredibly valuable” service that was on its way to connect 1 billion people across the globe.

“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” Zuckerberg said in his announcement of the deal. With WhatsApp under its command, Facebook, first of all, hopes to “make the world more open and connected.” Secondly, Facebook would be able to please its investors who were murmuring about its strategy for mobile.

WhatsApp iphone apps page

Facebook and WhatsApp Deal

The purchase has worked out in a mix of cash and stock. The deal goes like this. WhatsApp will get $12 billion in Facebook shares and $4 billion in cash. Added with it goes an extra $3 billion in restricted shares, set for payout at a later date. WhatsApp will continue the service as the unit will be operating as an autonomous one at Facebook. WhatsApp team may be joining Facebook, with its CEO making his way into the Facebook’s board. Complete ownership structure of the WhatsApp hasn’t been disclosed yet.

To Engage More in Mobile Battle

Tech firms are working to obtain more ground in mobile business. The tech world is switching its focus from desktops to mobiles and other portable or wearable gadgets. It is sure Facebook has ventured for the massive deal to stretch out its presence in mobile business rather wider.

As you know, WhatsApp is a fast-growing mobile messaging platform. It boasts of featuring around 1m new users a day, and it pockets a splendid market charisma in Europe and Latin America. In countries like Germany, Portugal and Brazil, it has a market penetration up to 80 percent. That means Facebook’s persistence not to skip its dominance in social media market will be on threat, and so it wanted to gulp the rival down. This is where Facebook goes for such a deal.



News Source: Facebook Newsroom via VentureBeat
Image Source: Flickr via Jan Persiel