In a surprising deal announced on Wednesday, the world’s biggest social networking site, Facebook that has more than 1.2 bn members acquired the 450-million-strong smartphone messaging service WhatsApp. The deal consisting of cash-and-stock is worth up to $19 billion.
WhatsApp is a cross-platform mobile app that allows users of smart phones to exchange messages freely. The app has seen blistering growth and is on the way to hit a billion users. Zuckerberg said while discussing the purchase price that services with a billion users are incredibly valuable.
Zuckerberg said that the deal came from a chat he had with WhatsApp co-founder Jan Koum, last Sunday evening. Zuckerberg proposed that if Facebook and Whatsapp joined together then it would help them really connect the rest of the world. Koum thought about it over the week and came back saying that he was interested.
The deal includes $12 billion in shares of Facebook, $4 billion cash and an additional $3 billion in restricted stock units to WhatsApp founders and employees which will vest over four years.
Interestingly Facebook had earlier sought to acquire Snapchat, which is another hot messaging firm. The deal was offered last year for $3 billion but it fell through. In 2012 Facebook acquired Instagram for $1 billion.
Greg Sterling of Opus Research said that the deal is a risk for Facebook as in social media a new app is the flavor of the month. He said that Facebook may “monetize” WhatsApp by including ads over the messaging service.