Facebook buys WhatsApp in $16bn deal to target teens and boost messaging service

Facebook is buying mobile messaging service WhatsApp for up to $19 billion in cash and stock in the firms biggest ever acquisition. The world’s biggest social networking company said that it is paying $12 billion in Facebook stock and $4 billion in cash for WhatsApp. 

In addition, the app’s founders and employees will be granted $3 billion in restricted stock that will vest over four years after the deal closes.

Facebook says it is keeping WhatsApp as a separate service, just as it did with Instagram, which it bought for about $715.3 million.

‘The acquisition supports Facebook and WhatsApp’s shared mission to bring more connectivity and utility to the world by delivering core internet services efficiently and affordably,’ the social network said.

WhatsApp has more than 450 million monthly active users. In comparison, Twitter had 241 million users at the end of 2014.

Facebook CEO Mark Zuckerberg says WhatsApp is on path to reach a billion users.

‘The combination of WhatsApp and Facebook will allow us to connect many more people round the world,’ Zuckerberg said.

‘We want to develop more mobile experiences like Instagram and Messenger.

‘WhatApp fits this vision perfectly, it has incredibly strong engagement and growth.’

‘It’s the only app we’ve ever seen that has grown more quickly than Facebook itself.’

‘Their product roadmap is very exciting and won’t change.

‘Overall, I’m very excited about this deal.

‘WhatsApp had every option in the world, so I’m thrilled they chose us.’

As part of the deal, WhatsApp co-founder and Chief Executive Jan Koum will join Facebook’s board, and the social network will grant an additional $3 billion worth of restricted stock units to WhatsApp’s founders, including Koum.

This is an incredible moment for me,’ Mr Koum said.

‘Every day over 19bn messages are sent, with over 1m new users every day.’We wanted it to be simple, and a better service than SMS.’

‘We’re excited and honoured to partner with Mark and Facebook as we continue to bring our product to more people around the world,’

‘WhatsApp’s extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide.’

The deal instantly makes WhatsApp cofounders Jan Koum and Brian Acton billionaires.

Forbes estimates that Koum held about a 45% stake in the company, while Acton’s stake was over 20%.

Facebook promised to keep the WhatsApp brand and service, and pledged a $1 billion cash break-up fee were the deal to fall through.

WhatsApp will remain based in Mountain View, Calif., and Facebook said its own messenger app and WhatsApp’s core messaging product will continue to operate as separate applications

Shares in Facebook slid 5 percent to $64.70 after hours, from a close of $68.06 on the Nasdaq.

Facebook was advised by Allen & Co, while WhatApp has enlisted Morgan Stanley for the deal.

The deal is the latest aquisition for Facebook, which last year bought Instagram.

It also reportedly offered to pay close to $3 billion or more to acquire messaging service Snapchat, though that offer was spurned by the site’s founders.

Zuckerberg said WhatsApp would operate in the same way as Instagram, as a separate firm.

‘It would be pretty stupid of us to interfere,’ he said.

He also said he was not planning to put ads on the service.

‘Our strategy is to grow and connect people.

‘Once we get to 2-3 billion people there are ways we can monetise.

‘Now we want to focus on growing users. I don’t think ads are the right way here.’

Koum also pledged not to add ads to WhatsApp, which makes money from a subscription model.

‘We think advertising is not the way to go – we create a direct relationship with customers,’ said Koum.

‘We want to make the product better, faster and more efficient.’

Experts say the deal could help Facebook attract teens.

Professor Will Stewart from the Institution of Engineering and Technology (IET) said: ‘Obviously WhatsApp adds instant messaging to Facebook which must strengthen their position for the moment.

‘Equally, all app types rise and fade, so established social media formats like Facebook will be overtaken by something new, and picking up candidates that might have ultimately replaced them may be a good survival strategy for a while.

‘This does show the growing significance of mobile, though of course Facebook is on mobile anyway.

‘But, Facebook has been around a while now so the real question is what comes next?’

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