Facebook buys WhatsApp for $19bn, promises to keep it ad free

In what some have billed the largest startup acquisition in web history, Facebook on Wednesday agreed to acquire cloud-based over the top mobile messaging firm WhatsApp for an eye watering $19bn.

The social networking giant will acquire WhatsApp for  $4bn in cash and approximately $12bn worth of Facebook shares. In addition, upon closing Facebook will grant 45,966,444 restricted stock units to WhatsApp employees worth $3bn.

WhatsApp co-founder and chief executive officer Jan Koum said: “WhatsApp’s extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide.”

Facebook CEO Mark Zuckerberg told analysts in a call Wednesday evening that WhatsApp will remain autonomous and though he didn’t expand on plans for further integration he did say that the acquisition will “strengthen” both services.

“It would be pretty stupid for us to interfere in a big way,” he said.

Facebook has 945 million users according to Zukerberg and WhatsApp has 450 million. But the OTT messaging service is apparently adding roughly one million users a day, and already carries over 18 billion messages daily.

Zuckerberg said the Facebook messenger isn’t really focused on real-time messaging, whereas Whatsapp works “as fast and as reliably” as SMS.

“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” said Mark Zuckerberg, founder and chief executive officer of Facebook. “I’ve known Jan for a long time and I’m excited to partner with him and his team to make the world more open and connected.”

Whatsapp is currently monetised through a one-off fee of £1, and doesn’t host any advertising – something Zuckerberg claimed would continue. But Facebook could generate revenue by tapping into messaging content (which it already can with SMS and MMS) to improve the accuracy of its mobile advertising and maintain what is already a high growth business for the social media giant.

According to eMarketer nearly a third of the US population (99.2 million) used Facebook mobile in 2013, up nearly 20 per cent from 2012. Facebook had a 16 per cent share of all mobile ad dollars spent in the US in 2013, up from 9 per cent in 2012.

Facebook chief financial officer David Ebersman said the company looked at other services to get an idea of the value of the company, including SMS, which according to Ebersman is a $100bn business.

News of the acquisition comes as Zuckerberg gears up to deliver a keynote at Mobile World Congress, an annual gathering of mobile operators and telecoms vendors taking place in Barcelona next week. Zuckerberg himself has previously billed Facebook as a predominately mobile-focused company (remember the ill-fated Facebook Home?), but telcos generally see OTT players like Facebook and WhatsApp as not only threats to their core business (SMS) but huge bandwidth hogs so it will be interesting to see how mobile operators respond.

This article originally appeared on our sister site, Businesscloudnews.com