WhatsApp: A $19 billion bet for Facebook
By BARBARA ORTUTAY and MICHAEL LIEDTKE (AP)
February 20, 2014, 3:10 pm TWN
NEW YORK (AP) — Facebook is placing a $19 billion bet on reaching its next billion mobile users with the acquisition of WhatsApp, a popular messaging service that lets people send texts, photos and videos on their smartphones.
The deal is by far Facebook's largest and bigger than any that Google, Microsoft or Apple have ever done. But it is likely to raise worries that Facebook and other technology companies are starting to become overzealous in their pursuit of promising new products and services, said Anthony Michael Sabino, a St. John's University business professor.
"I expect there to be a lot of skepticism about this deal. People are going to look at this and say, 'Uh-oh, did they pay way too much for this?" Sabino said.
The world's biggest social networking company is taking the long view. WhatsApp has 450 million monthly users, 70 percent of whom use it every day. The service is adding a million new users a day. There are 19 billion messages sent and 34 billion received via WhatsApp each day, in addition to 600 million photos and 100 million video messages.
At this rate, Facebook CEO Mark Zuckerberg is confident the app will reach a billion users. Services that reach that milestone, Zuckerberg said in a statement, "are all incredibly valuable."
Facebook said Wednesday that it's paying $12 billion in 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.
The transaction translates to roughly 11 percent of Facebook's market value. In comparison, Google's biggest deal was its $12.5 billion purchase of Motorola Mobility, while Microsoft's largest was Skype at $8.5 billion. Apple, meanwhile, has never done a deal above $1 billion.
Facebook's $1 billion Instagram deal seems like a bargain in retrospect. Capturing mobile users — and young people — was a big reason behind Facebook's 2012 purchase of the photo-sharing app. Even its reported $3 billion offer for disappearing-message app Snapchat pales in comparison. Snapchat rejected the bid.
The deal stunned Gartner analyst Brian Blau. "I am not surprised they went after WhatsApp, but the amount is staggering," he said.