For $16billion, Whatsapp becomes Facebook's property

Facebook Inc will buy fast-growing mobile-messaging startup WhatsApp for $16 billion in cash and stock, as the world's largest social network looks for ways to boost its popularity, especially among a younger crowd.
Facebook said on Wednesday it will pay $4 billion in cash and about $12 billion in stock in its single largest acquisition, dwarfing the $1 billion it paid for photo-sharing app Instagram.
Shares in Facebook slid 5 percent to $64.70 after hours, from a close of $68.06 on the Nasdaq.

As part of the deal, WhatsApp co-founder and Chief Executive Jan Koum 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.
What does Facebook stand to gain?
WhatsApp has grown massively since its inception – int he calendar year 2013 its users sent 18 billion messages and received 36 billion in return – a massive number that is fully three times the previous year’s metrics. But massive growth and a defensible position are two different things – WhatsApp had rivals, from Apple , Facebook and, to a lesser extent, Twitter. It also had the lofty ambition (if difficult form a revenue perspective) of not pushing advertising onto its users.
Facebook hasn’t yet commented about what this means for WhatsApp and, more importantly how they’re leverage those massive numbers to deliver value back to the company. One assumes that CEOMark Zuckerberg believes WhatsApp has the scale to have created a real degree of stickiness and hence be somewhat insulated from any potential customer revolt that might come from a move towards advertising on the platform. Then again users won’t exactly like their conversations being mined to deliver advertising to their Facebook profiles either.
This is one of those strategic acquisitions that could go awesomely, or horribly wrong. It’s a big, ballsy move by Facebook and will be watched by the industry, and the financial markets, very closely.

No comments

Powered by Blogger.