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Facebook set to acquire WhatsApp; Co-founder Jan Koum to join Facebook Board

21-February-2014
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Facebook set to acquire WhatsApp; Co-founder Jan Koum to join Facebook Board

Facebook has announced that it has reached a definitive agreement to acquire mobile messaging company WhatsApp. The deal totals around $16 billion, with $4 billion in cash and approximately $12 billion in Facebook shares. The agreement also provides for an additional $3 billion in restricted stock units to be granted to WhatsApp’s founders and employees over four years subsequent to closing of the deal.

This is Facebook’s biggest acquisition so far and the first time that it has bought a ‘paid’ product (WhatsApp charges users for the service in some markets). More interestingly, Co-founder Jan Koum will be joining the Facebook Board of Directors, the company has announced.

WhatsApp boasts of over 450 million people using the service each month. It also has a 73 per cent daily active user base, which is much higher than that of Facebook. With the service adding 1 million registered users every day, it is expected to reach nearly 1 billion users in the next couple of years, giving Facebook a great avenue into the mobile space at a global level.

“Over the past couple of years, Facebook has been on a journey to become a truly mobile company,” said Facebook Founder Mark Zuckerberg in the conference call held to announce the acquisition. Facebook’s suite of mobile products, which includes Instagram, Facebook Messenger and, of course, Facebook itself, currently have 950 million mobile users per month, of which 550 million use them every day. He further said that WhatsApp will continue to run independently.

Though it was not directly mentioned whether WhatsApp will now become a completely paid service in all geographies, Zuckerberg did say that their dream was to provide “basic internet services at affordable prices”, which could mean that WhatsApp might turn into a completely paid model, especially since both co-founders of the company have always maintained a strict “No Advertising” policy.

Facebook had first approached to buy WhatsApp in 2012 and talks between the two companies have continued since then. Last year, there were reports of a potential $3 million interest in Snapchat, another mobile IM company, though a deal never materialised.

The acquisition is expected to close this year subject to regulatory approvals.
 

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