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Facebook to Buy Silicon Valley Startup WhatsApp Messenger for $19B

Facebook to Buy Silicon Valley Startup WhatsApp Messenger for $19B
Bernadine Racoma

WhatsApp Messenger, the popular cross-platform mobile messaging application will be bought by Facebook for a total of $19 billion, according to the announcement on February 19 and the SEC filing. Compared to its competitors from Asia such as WeChat, KakaoTalk and LINE, WhatsApp claims that it did not spend anything for advertising and marketing. Users, which is said to be about 450 million each month, spread the word through text messaging and contributed to its phenomenal growth.

Total purchase amount and terms

The total amount of the purchase deal is broken into $4 billion in cash, $12 billion shares in Facebook, and $3 billion in restricted stock units (RSUs) for the employees and founders of WhatsApp to be vested over four years after the company is acquired. The $1 subscription fee each user pays after the first year of use will be retained by WhatsApp.

According to the terms of the deal, Facebook will pay a termination fee of one billion in shares and another billion in cash if the deal will not get regulatory approval. The brand will be retained and WhatsApp’s operation will still be independent from Facebook. The messaging application of Facebook and that of WhatsApp will be separate stand-alone applications. CEO and co-founder Jan Koum will be joining the board of Facebook.

Phenomenal growth

According to the released data, there are 450 million monthly active users of WhatsApp, with about 70% or 315 million of them active daily. Facebook states that about a million users are added to the number of users daily, sending a volume of SMS that is equivalent to the volume of the total telecom industry on a global scale.

Mark Zuckerberg, the CEO of Facebook remarks that the messaging application is close to having about one billion people connected. He is very enthusiastic about the future of the two companies, and what it means to WhatsApp and Facebook and the mobile services they can offer to users. Jan Koum on the other hand notes that there will still be no advertising in the application, which is a stipulation that made the deal happen.

What is WhatsApp?

For those not familiar with the application, WhatsApp is a subscription-based mobile messaging application for smartphones. Jan Koum, current CEO and Brian Acton, both former Yahoo! employees, founded the company in 2009. It has a total of 50 employees, 32 of which are engineers. The application works across several platforms including platforms used by Google, Blackberry OS, Android, Symbian, Microsoft Windows Phone, Apple iOS, Blackberry 10, selected platform of the Nokia Asha series and Nokia Series 40 as well as Android platform. Aside from instant messages, the application allows user to send audio and videos messages as well as photos.

Pundits are asking how WhatsApp’s core value of not pushing advertising to its subscribers will affect Facebook in terms of revenue.

Photo credit: Taken by WhatsUp Inc> under Creative Commons Attribution-Share Alike 3.0 Unported License.

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