Facebook's acquisition of mobile messaging service WhatsApp for $19 billion in cash and stock, is by far Mark Zuckerberg-led company's largest acquisition and bigger than any that Google, Microsoft or Apple Inc have ever done.
The deal translates to roughly nine per cent of Facebook's market value. In comparison, Google's biggest deal, Motorola Mobility, stood at $12.5 billion, while Microsoft's largest was Skype at $8.5 billion. Apple, meanwhile, has never done a deal above $1 billion.
Facebook said it is keeping WhatsApp as a separate service, just as it did with Instagram, which it bought for about $715.3 million in two years ago.
The price stunned Gartner analyst Brian Blau. “I am not surprised they went after WhatsApp, but the amount is staggering,'' he said.
Facebook, world's biggest social networking company, said Wednesday that it is paying $12 billion in Facebook stock and $4 billion in cash for WhatsApp. In addition, the app's founders and employees – 55 in all – will be granted restricted stock worth $3 billion that will vest over four years after the deal closes.
Facebook likely prizes WhatsApp for its audience of teenagers and young adults who are increasingly using the service to engage in online conversations outside of Facebook, which has evolved into a more mainstream hangout inhabited by their parents, grandparents and even their bosses at work.
“This is a bet on the future for Facebook,'' Blau said. “They know they have to expand their business lines. WhatsApp is in the business of collecting people's conversations, so Facebook is going to get some great data.''
In that sense, the acquisition makes sense for 10-year-old Facebook as it looks to attract its next billion users while keeping its existing 1.23 billion members, including teenagers, interested. The company has said it will develop a “multi-app'' strategy, creating its own applications that exist outside of Facebook and acquiring others.
“Facebook seems to be in acknowledgement that people are using a lot of different apps to communicate,'' said eMarketer analyst Debra Aho Williamson.
“In order to continue to reach audiences, younger in particular, it needs to have a broader strategy... not put all its eggs in one basket.''
WhatsApp has more than 450 million monthly active users. In comparison, Twitter had 241 million users at the end of 2013.
Facebook CEO Mark Zuckerberg says WhatsApp is on path to reach a billion