Everything you need to know about Facebook’s single-largest deal to date, and one of the largest in recent memory for Web companies.
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In one of the largest Internet deals in recent memory, Facebook said today that it would acquire WhatsApp for up to $19 billion through a combination of cash, stock, and restricted stock units.
Facebook, which missed out on buying Snapchat for about $3 billion late last year, is spending more than a third of its existing cash pile on a company of about 50 people that have built one of the fastest-growing messaging services in the history of the Web. At the time of the acquisition, WhatsApp had more than 450 million monthly active users and the service was growing by 1 million new users every day, 70% of which check the app on a daily basis.
WhatsApp will coexist with Facebook Messenger, the company's own messaging product, in what is essentially an admission from CEO Mark Zuckerberg that the company didn't have real-time communication down — even with a standalone application for Facebook Messenger which also tied in with text messaging on Android devices.
"It's widely used today for chatting with your Facebook friends, and a lot of the messages are not real time," Zuckerberg said on a conference call to discuss the acquisition. "Someone will send a message, almost like a more informal email. WhatsApp evolved from replacing SMS, real-time communication with all your contacts and small groups of people."
The deal was done, like in the case of Instagram, personally by Zuckerberg. On the conference call, he said he met with WhatsApp CEO and founder Jan Koum about 11 days ago to discuss the merger, though talks have been on and off for the past several years. The deal was finalized on Valentine's Day, last friday, according to Business Insider's Nicholas Carlson.
While Facebook is quite active in acquiring companies, it's become clear that Zuckerberg personally handles deals with companies that represent a sort of existential threat to Facebook. Facebook bought Instagram for what was seemingly a cheap $1 billion at the time — which some in the venture capital community now say was too little — at a time when it was the fastest-growing photo-sharing application in the world. Likewise, it sought Snapchat when it became clear that the self-destructing photo-sharing app was siphoning a younger set of Facebook's users away from the service.
WhatsApp, too, represents an existential threat to Facebook as a smattering of messaging apps have risen up to challenge the dominance of Facebook as a method for sharing content through mobile devices. "Messaging is a very competitive space, and WhatsApp is the clear global leader with this," Zuckerberg said on the call, in response to a question about competing messaging apps like Kakao, Line and WeChat.
It represented so much of a threat that Zuckerberg was willing to spend $380 million on every employee WhatsApp, which is on track to hit 1 billion users faster than Facebook was ever able to do. WhatsApp employees will enjoy an incredibly healthy return for their efforts, but it will be nowhere near that of Sequoia Capital's Jim Goetz, whose $8 million investment in 2011 when the app was tiny will have blossomed into an enormous return for the firm.
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