Facebook to Take Over Instant Messaging Service WhatsAppDale Wright
Social networking giant Facebook has revealed that it will buy popular messaging app WhatsApp for $19bn (£11.4bn) in a deal comprised of cash and shares.
The acquisition means that Facebook will pay $4bn in cash, $12bn in shares, with a further $3bn in restricted stock to go to WhatsApp’s employees. Facebook and WhatsApp have both stressed that nothing will change for the messaging company – it will be able to operate in exactly the same way without interference from Facebook. There won’t be ads on WhatsApp and it’s still going to be very cheap to use.
Facebook taking over WhatsApp isn’t a surprise really: it’s primarily about eliminating the competition. Droves of teenagers are moving away from using Facebook to favor the instant messaging app. However, what is surprising is how much Facebook paid for the acquisition. $19bn is a lot of money by anyone’s standards and many critics are already suggesting that Facebook has overpaid for WhatsApp. Nearly two years ago, Facebook bought Instagram for $1.1bn – an amount that seems like loose change now. Facebook obviously has a strong business plan of how it will make the WhatsApp buyout worth every penny.
What is Facebook’s plan for WhatsApp then? We can only guess, of course: Facebook’s not likely to announce its strategy. WhatsApp has over 450 million regular monthly users, but this isn’t simply an attempt to grow Facebook’s audience. Like we mentioned, WhatsApp has a hold on a younger demographic than Facebook, and its audience comes mainly from Europe. Facebook’s partnership with WhatsApp is about diversifying its audience, and trying to get a hold of the ‘youth vote’.
Younger users of social media are also more likely to be open to engagement. This is the key point: more engagement means that Facebook is more attractive to advertisers. Sure, WhatsApp won’t be getting adverts, but if Facebook is going to become more integrated with the messaging company, there’s going to be some serious advertising money in this deal.