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Thursday 20 February 2014

Facebook to buy WhatsApp for a whopping $19 billion - Here's why...

Facebook Inc will buy fast-growing mobile-messaging startup WhatsApp for $19 billion in cash and stock, as the world's largest social network looks for ways to boost its popularity, especially among a younger crowd. 


The acquisition of the hot messaging service with more than 450 million users around the world stunned many Silicon Valley observers with its lofty price tag. But it underscores Facebook's determination to win the market for messaging, an indispensable utility in a mobile era. 

Combining text messaging and social networking, messaging apps provide a quick way for smartphone users to trade everything from brief texts to flirtatious pictures to YouTube clips - bypassing the need to pay wireless carriers for messaging services. 

And it helps Facebook tap teens who will eschew the mainstream social networks and prefer WhatsApp and rivals such as Line and WeChat, which have exploded in size as mobile messaging takes off. 



Facebook 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. The price paid for Instagram, which with just 30 million users was already considered overvalued by many observers at the time. Facebook promised to keep the WhatsApp brand and service, and pledged a $1 billion cash break-up fee if the deal falls through. 



Zuckerberg said that WhatsApp - a cross-platform mobile app which allows users to exchange messages without having to pay telecom charges -- was worth the steep price because its blistering growth around the globe has it on a clear path to hit a billion users and beyond.


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