Determined to hang onto
younger users, Facebook is shelling out a staggering $19 billion to buy mobile messaging app WhatsApp.
“I’m excited to announce that we’ve agreed to acquire WhatsApp
and that their entire team will be joining us,” Facebook founder Mark Zuckerberg wrote in a note posted to his Facebook page on Wednesday. “WhatsApp will complement our existing chat and
messaging services [including Facebook Messenger] to provide new tools for our community.”
WhatsApp is part of a new breed of social networks and messaging apps that have been
chipping away at Facebook’s market dominance, especially among younger consumers.
Marketers were not immediately sure what to make of the deal on Wednesday.
“This is more of a communication infrastructure play than a media or user play," said Gary Vaynerchuk, whose digital agency, VaynerMedia, handles social media duties for
brands like Del Monte, General Electric and PepsiCo. For agencies, the acquisition means “very little for now because Facebook is too smart to let brands jump into this world,” he said.
“They are [going to] allow it to stand alone and thrive for the next year or two at least … after that, it becomes more of a conversation.”
The deal marks
Facebook’s biggest acquisition to date and overshadows the $1 billion it paid for Instagram in 2012. At the time, many analysts thought the social giant overpaid for Instagram, although young
consumers’ increasing preference for the latter platform appears to have validated the decision.
In the fourth quarter of 2013, Facebook’s global share of active
teen users continued to slide to 48.5% from 56% in the third quarter -- and 76% in the first quarter of last year -- according to social media data from GlobalWebIndex.
share grew to 35% of active teens users during the fourth quarter of the year, by GlobalWebIndex’s estimation.
Irresistible to frugal teens, WhatsApp allows users to send text
messages for free because its Web-based service sidesteps carrier fees.
By Zuckerberg’s count, roughly 450 million consumers are currently using WhatsApp on a monthly basis.
“More than 1 million people sign up for WhatsApp every day, and it is on its way to connecting 1 billion people,” Zuckerberg wrote on his page.
mobile-focus also plays into Facebook’s aggressive efforts to break out of consumer desktops.
Once a clear weakness, Facebook’s mobile strategy has received a big boost
over the past year. Indeed, mobile advertising made up the majority of the company’s ad sales in the fourth quarter of 2013, which propelled overall revenue growth of 63% in the period.
Facebook’s $1.8 billion in advertising sales, which accounted for 89% of total revenue, surged 76% in the fourth quarter -- up from 66% growth in the prior quarter. Mobile
advertising, for the first time, accounted for more than half the company’s ad revenue in a quarter: at 53% -- nearly double the 23% it made up in the year-earlier period.
forward, Zuckerberg noted: “Since WhatsApp and Messenger serve such different and important uses, we will continue investing in both.” In a regulatory filing, Facebook said it plans to
acquire all outstanding stock and options in WhatsApp for about 183 million of its shares, which are valued at approximately $12 billion.
The deal also includes $4 billion in cash,
and an additional $3 billion in restricted stock units, which will be granted to WhatsApp's founders and workforce.