E-Business

Why Facebook is Buying WhatsApp for $19Bn

Published

on

Facebook is buying fast-growing mobile-messaging startup WhatsApp for $19 billion in cash and stock, as a way to boost its popularity, especially among a younger crowd.

The purchase underscores Facebook’s determination to win the market for messaging, an indispensable utility in a mobile era.

Combining text messaging and social networking, messaging apps provide a quick way for smartphone users to trade everything from brief texts to flirtatious pictures to YouTube clips – bypassing the need to pay wireless carriers for messaging services.

“People are calling them ‘Facebook Nevers,'” said Jeremy Liew, a partner at Lightspeed and an early investor in Snapchat.

WhatsApp is adding about a million users per day,  Mark Zuckerberg, Facebook co-founder and chief executive officer said on his page on Wednesday.

“WhatsApp will complement our existing chat and messaging services to provide new tools for our community,” he wrote on his Facebook page.

“Since WhatsApp and (Facebook) Messenger serve such different and important users, we will continue investing in both.”

As part of the deal, Jan Koum, WhatsApp co-founder and chief executive officer will join Facebook’s board, and the social network will grant an additional $3 billion worth of restricted stock units to WhatsApp’s founders, including Koum.

That is on top of the $16 billion in cash and stock that Facebook will pay.

“Goodness gracious, it’s a good deal for WhatsApp,” Teo said.

Facebook promised to keep the WhatsApp brand and service, and pledged a $1 billion cash break-up fee if the deal falls through.

Facebook was advised by Allen & Co, while WhatsApp has enlisted Morgan Stanley for the deal.

Comments

Trending

Exit mobile version