Facebook to acquire WhatsApp for $16B

Facebook (NASDAQ:FB) announced it will acquire over-the-top mobile messaging company WhatsApp for a whopping $16 billion. The purchase pushes Facebook more firmly into the mobile and messaging market, where it has already stamped out a huge business via mobile ads and its previous $1 billion acquisition of photo-sharing service Instagram.

In announcing its purchase--and likely in an effort to validate the astounding $16 billion price tag--Facebook disclosed that WhatsApp counts over 450 million people using the service each month and that fully 70 percent of those people active on a given day. Further, Facebook said that WhatsApp's messaging volume is approaching "the entire global telecom SMS volume." Facebook said WhatsApp is adding more than 1 million new registered users per day.

"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," Facebook founder and CEO Mark Zuckerberg said in a statement.

WhatsApp has grown into a huge presence in the mobile messaging market by offering cheap or free IP-based messaging and calling services, thereby cutting into wireless carriers' own voice and messaging revenues. Wireless carriers across the globe have responded to OTT messaging companies like WhatsApp with unlimited calling and texting services, as well as their own messaging service.

Under the terms of Facebook's acquisition of WhatsApp, Facebook will spend $4 billion in cash and around $12 billion in shares for the purchase. The deal also carries an additional $3 billion in restricted stock units to be granted to WhatsApp's founders and employees that will vest over four years subsequent to closing.

"Facebook fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook's expertise, resources and scale," Facebook explained in its announcement. "This approach is working well with Instagram, and WhatsApp will operate in this manner. WhatsApp's brand will be maintained; its headquarters will remain in Mountain View, Calif." Facebook said Jan Koum, WhatsApp's founder and CEO, will join Facebook's board.

Importantly, Facebook said WhatsApp's core messaging product and Facebook's existing Messenger app will continue to operate as standalone applications.

WhatsApp could eventually create another significant mobile advertising platform for Facebook's mobile ad strategy. Already, via Facebook's existing mobile service, the company said its mobile advertising revenue represented approximately 53 percent of its total advertising revenue in the fourth quarter, up from 49 percent in the third quarter and 23 percent in the year-ago period. The company said mobile daily active users totaled 556 million for December 2013, an increase of 49 percent year-over-year.

For more:
- see this release
- see this SEC filing

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