On Wednesday 19th February 2014, Facebook announced that it will acquire the popular messaging app, WhatsApp, for $16 billion. Is WhatsApp really worth this much, or does this just prove that Facebook has too much money? Well, Mark Zuckerberg, Facebook’s boss, seems to think it is worth every penny!
Mark says that WhatsApp had reached 450 million users much faster than any other web service and it has also made itself addictive to its users: 72% of people are active on it every day, and they have achieved this without spending a penny on marketing.
What Is WhatsApp?
WhatApp is a messaging service that lets people send text messages and share photos and other forms of media without incurring charges from telecoms companies. WhatsApp is free to use for 12 months and then costs a mere 99p per year. Plenty of other such apps have sprung up, including Viber, which Rakuten, a Japanese internet giant, recently bought for $900m, and the immensely popular WeChat, which belongs to Tencent, an innovative Chinese company.
What Does This Mean?
Indeed, WhatsApp’s success in many ways mirrors that of Facebook itself, which came from nowhere to dominate social networking. Recently, however, Facebook has been losing some of its cool, especially among younger users. That may explain why Mark Zuckerberg is willing to pay this huge amount for a company that might ultimately eclipse his own creation. He has spent lavishly before, paying around $1 billion for Instagram, a photo-sharing app, in 2012.
The following chart compares Facebook’s most recent acquisition with other relatively recent, high-profile deals, such as Google’s purchase of YouTube and Microsoft’s acquisition of Skype.