So Facebook has bought popular messaging app WhatsApp for $19bn. Why did Facebook buy Whatsapp? What does this mean for Facebook and Whatsapp? We explain what the deal means for users.
For those interested in the numbers Facebook is paying WhatsApp $16bn which consists of $4bn in cash and $12bn in shares. There's also a further $3bn 'restricted stock units' which will be granted to WhatsApp's founders and employees that will vest over four years subsequent to closing.
"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."
Why Facebook bought WhatsApp
Facebook's official line on the matter is that "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."
What'sApp has gained 450 million users worldwide with 70 percent of them active on any one day. The service has more than one million users being added every day, too. It also shares a common goal with Facebook and that is to connect people. See also: WhatsApp deal gives Facebook a path to crowded China market.
Those numbers show that WhatsApp is a threat to its dominance with numerous recent report suggesting that younger users are fleeing from Facebook because it's becoming 'uncool' by way of more parents joining. Messaging apps like WhatApp provide these users more privacy from the older generation and a more direct way of communicating with friends.
Facebook doesn't want to be replaced by the next big thing and that massive audience is valuable to in various ways. With a big player like WhatsApp springing up, buying it out is one surefire way of making sure your competitors, such as Google and Yahoo, don't gain the value.
WhatsApp looks set to hit the 1 billion mark so is a massively key online platform so Facebook didn't want to sit around doing nothing about it.
"Facebook fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook’s expertise, resources and scale. This approach is working well with Instagram, and WhatsApp will operate in this manner." added the social networking giant.
Practically, WhatsApp's headquarters will remain in Mountain View, California and Jan Koum, the messaging app's CEO, will join Facebook’s Board of Directors.
What it means for WhatsApp and Facebook users
Whether you use Facebook, WhatsApp or both, you're probably wondering what this deal means for you. You might imagine that Facebook will merge WhatsApp with its own messaging service. However, this is not the case.
"WhatsApp’s core messaging product and Facebook’s existing Messenger app will continue to operate as standalone applications." Facebook said in a statement.
With an massive, young and international audience it would make sense to monetise it by way of advertising but Zuckerberg says that this won't happen and isn't the best way of making money from messaging systems. Whether this remains the case or not is another matter.
For now Facebook Messenger and WhatsApp will remain separate but is poses a challenge for Facebook going forwards.
Martin Garner, SVP, CCS Insight comments: "Facebook will be under significant pressure to ensure that it maintains engagement levels for its multiple assets and can identify means of monetisation. Moreover, given the diversification that Facebook itself is witnessing, there will be areas of overlap. One example, is Facebook messenger and WhatsApp. This is inevitable and not necessarily a problem in the short term but likely to cause investor consternation if one service ends up cannibalising another, particularly if the casualty has a clearer business model."