Facebook plans to acquire the messaging service WhatsApp, the company announced on Wednesday.
The move marks the social giant’s biggest acquisition to date, as Facebook paid $16 billion in cash and stock for the company. In addition, the deal includes another $3 billion in restricted stock units for WhatsApp employees, which will vest over a period of time.
“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” Facebook CEO Mark Zuckerberg said in a statement.
It is perhaps a surprising end to the independence of one of Silicon Valley’s most desired messaging startups, which has been pursued by suitors such as Google and, for a very long time, Facebook. And in a landmark moment for the acquisition of a messaging app, the final price speaks to the extent to which Facebook is willing to go to grab real estate on mobile devices.
The first time I heard of WhatsApp was in the Summer of 2012. I was in college doing a study abroad program in London, where I met students from Italy, Singapore, Australia, and many other countries. Whenever people talked about getting in touch, people from outside the US would always ask: “Do you have Whatsapp?”1. Whenever I said no, I’d be treated to an incredulous look, much like the one people receive when they say they don’t use Facebook.
I, too, found it strange that I had not heard of WhatsApp prior to this point, especially considering how seemingly ubiquitous it was. I was writing “the rajam report” at the time, and considered myself to be “in the loop” when it came to the latest apps and services on the mobile front.
Nevertheless, I ended up installing the app and using it to communicate with classmates while in London. I didn’t quite grasp what made it so special, other than it didn’t require a Facebook account, which most of these people had.
When I eventually returned to the US, I noticed that most of my peers stuck with SMS, Facebook Messenger, and iMessage. WhatsApp wasn’t even part of the conversation. Eventually my usage of WhatsApp came to a halt.
It seemed to me that WhatsApp was a popular service everywhere, except the US.
I’m not one to assume that my anecdote means anything for the rest of the world, but the data supports this theory. Josh Constine and Kim-Mai Cutler, reporting for TechCrunch:
Unlike PC-based social networking, there is no outstanding market leader in mobile messaging. Facebook recently said on its earnings call a few weeks ago that its November relaunch of Messenger led to a 70 percent increase in usage, with many more messages being sent. But much of that was likely in the United States and Canada where the standalone messaging app war is still to be won.
Meanwhile, Whatsapp absolutely dominates in markets outside of the U.S. like Europe and India. It’s also impossible for Facebook to acquire certain other Asian competitors like WeChat, which is the one hope of Chinese mega-giant Tencent to have a global consumer product.
When you look at the graphic in this article, the numbers are pretty damning. In pretty much every market outside of the US, WhatsApp is beating Facebook Messenger in the numbers. To the point that it looks like Facebook can’t catch up in the near future.
Those less familiar with WhatsApp and its wonderful product will marvel at how a young company could be so valuable. Many of those people will be in the U.S. because there’s no other home grown technology company that’s so widely loved overseas and so under appreciated at home.
At the end of the day, this acquisition is par-for-the-course for how Mark Zuckerberg deals with threats to Facebook’s ubiquity: beat the competition with a better product, or give them a boatload of cash and carte blanche to do whatever they want (in the short term) under Facebook’s ownership.
When your goal is to “own social”, you can’t afford to let anyone else get a meaningful stake in the game.
More often than not they would follow this with “Are you on Viber?” Last week, Viber was acquired by Japanese company Rakuten for $800 million. Interesting how two services that, in my experience, were mentioned together got acquired within a week of each other. ↩