It seems that Facebook is set to buy WhatsApp. The popular messaging app which has close to a billion users is selling itself for a cool $16 billion in cash and stock. This a messaging app people! $19 billion? Facebook is basically paying billions for AOL Instant Messenger. I feel the past few years have been like the tech bubble of the late nineties and early 2000’s. You don’t remember that time? Let me refresh your memory. Websites were popping up left and right. They would go public and raise a ton. Others would be brought out for millions only to fail a few short years later. Some of these companies were not even making money. Apps are in a similar state right now. The new hotness gets the press, hype, users and billions.
Facebook flush with that still new IPO money has been trying to buy WhatsApp for a while. This is the largest acquisition Facebook has made thus far. Rumors has it that Facebook and Google were fighting it out to buy the messaging service.
WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable. I’ve known Jan [Koum, WhatsApp cofounder] for a long time and I’m excited to partner with him and his team to make the world more open and connected. ~Mark Zuckerberg
WhatsApp posed a threat to Facebook’s business just like Instagram did. The app is an alternative to SMS. What is does is send messages for free regardless of the device you are using. You may not have used WhatsApp but you sure have heard of it. The app is very popular abroad. Facebook will pay $12 billion in stock and $4 billion in cash for WhatsApp. As a bonus, Facebook will also give an extra $3 billion in restricted stock units to WhatsApp’s founders and employees as part of the deal. That brings the total of the deal to which would bring the total deal $19 billion.
Remember when AT&T was going to buy T-Mobile? The deal fell through and AT&T had to pay T-Mobile $4 Billion anyway? If the WhatsApp deal doesn’t go through, Facebook will have to pay $1 billion to WhatsApp. Why all the fuss over WhatsApp? They have over 450 million active users each month? To put things into perspective, Twitter and LinkedIn have less users. Facebook tried to buy Snapchat but the company said “nah thanks.” Facebook shareholders did not take well to the WhatsApp news. The stock declined by more than 4.5% in after hours trading after the announcement.