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Why Facebook dropped a whopping $19 bn on WhatsApp

Facebook might finally be able to breathe easy on the mobile messaging front.

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Ariha Setalvad Mumbai
With rumours circulating lately about Facebook losing appeal with kids, news of the social media giant’s acquisition of mobile-messaging service WhatsApp for a whopping total of $19 billion (that’s like 19 Instagrams!) raised some eyebrows.
The deal includes $4 billion in cash,$12 billion in Facebook stock, and up to $3 billion in restricted Facebook stock units to be given to WhatsApp founders and 55 employees over a four-year vesting period.

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Facebook has stumbled constantly while trying to become a ubiquitous presence on cell phones (remember the debacle that was Facebook Home?). With the acquisition of WhatsApp however, it seems that Facebook might be able to finally breathe easy on the mobile messaging front.
 
 
$19 billion may seem like a lot of money, but let’s take a look at what that sum buys Facebook.
 
WhatsApp has an estimated 450 million monthly users and the majority of them use the app every single day.450 million is almost half as many users as Facebook itself has. Put them together and you’ve basically covered everybody. Talk about ubiquity.

 
The messaging service is also growing a lot faster than Facebook is (WhatsApp has been bragging for a while that it adds about 1 million registered users per day), something Facebook seems to be acknowledging through the buyout.
 
The real catch for Facebook though, is the numerous WhatsApp users who aren’t already on Facebook. Many are spread across the globe; WhatsApp has plenty of users in America but it’s even more popular in the rest of the world, connecting people across multiple platforms. That makes for a lot of desirable users who just turned into Facebook people, like it or not.
 
Facebook also noted that the number of messages being sent through WhatsApp is “approaching the entire global telecom SMS volume”.
 
Despite talk of Facebook’s waning popularity, it doesn’t really seem that the company is in that much trouble. It’s difficult to really put a price on what Facebook is trying to achieve - trying to remain relevant in the long run – so maybe $19 billion is a small price to pay. Investors however, seem to be wary of the deal, as shares were down about 3% in after-hours trading. A mild reaction, but one that expresses doubt nonetheless.
 
What this acquisition really represents though, is the search that everyone’s on – the hunt for the Universal Service. The service that’s ridiculously easy to use, that already has everyone you'll ever know and works on all your devices. 
 
Isn’t it worth $19 billion for that kind of (potential) Holy Grail?

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First Published: Feb 20 2014 | 11:54 AM IST

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