WhatsApp, doc: Facebook has a new R208 billion toy

By on February 24, 2014
facebook_whatsapp

The app’s acquisition was apparently sealed over chocolate covered strawberries on valentine’s day. How romantic…

It started, of course, with a Facebook post: “I’m excited to announce that we’ve agreed to acquire WhatsApp and that their entire team will be joining us at Facebook,” Mark Zuckerberg said. So the entire team – all 50 of them – are traipsing over to Facebook’s office. Is it us, or are companies valued at more if they have fewer employees?

A statement revealed the details: Facebook will pay a whopping R208 billion for the app (R44 billion in cash, R131 billion Facebook shares, R33 billion of stock at a later date), which allows users to send messages over wifi and data connections, thereby bypassing text messaging fees. Because of that, the app is a hit with anyone who uses pre-paid phones, ie teenagers and those in developing economies. Incidentally, those are markets where Facebook’s popularity is either waning or is yet to grow.

You’ve got to admit, the figures are pretty impressive: Whatsapp is said to have 450 million monthly active users, with 70 percent returning to it on a daily basis. There had been some talk about monetising it with advertising – but Zuckerberg is reportedly keen to avoid that outcome. So that’s a relief.

In fact, it’s win-win for both sides – the Whatsapp founders walk off as billionaires; Facebook absorbs a potential competitor.

The deal makes Facebook’s R11 billion acquisition of Instagram last year look like small change. When that happened, everyone cried ‘bubble’. Imagine the posturing happening in boardrooms now.

But Zuckerberg is obviously deadly serious about WhatsApp’s potential. Although he said the prospect of a deal was only floated 11 days ago, that he has been wooing founder Jan Koum since the spring of 2012, with the two going on hikes to talk it over.

Koum apparently relented on Valentine’s day, interrupting the Zuckerbergs’ romantic dinner to deliver the good news. A final deal – which includes a seat on Facebook’s board for Koum – was thrashed out over chocolate-covered strawberries.

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