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Facebook to acquire WhatsApp for R209 billion, BUT why?

The balance of power in the mobile messaging space is about to shift in a big way — Facebook has just announced plans to acquire WhatsApp for the equivalent of $19 billion (R209 billion) in cash and stock. The deal will see WhatsApp run semi-independently, much like Instagram. The chat service will maintain its brand and existing offices, but it will take advantage of Facebook’s “expertise, resources and scale.” It’s safe to say that the combined entity will have a lot of clout should the deal close later this year. WhatsApp already has over 450 million active users every month; combine that with Facebook Messenger and competitors like Line suddenly appear tiny by comparison.

WhatsApp is a voice and text instant messaging platform with apps for most every smartphone OS. It provides free service for the first year and costs a dollar annually after that. Why then, did Facebook just buy WhatsApp — aside from the obvious cachet, keeping it away from Google and free advertising that comes with its omnipresence in Katy Perry’s Roar video — for $19 billion (with a ‘b’), when it already has Facebook Messenger?

In a word: users. 450 million of them to be precise, and 315 million of those are active on a given day. In fact, WhatsApp’s users are so prolific, its messaging volume is roughly equal to that of the entire world’s SMS traffic. And, WhatsApp is huge overseas and in emerging markets. According to a report from mobile marketing and research firm Jana, the app is far and away the most used messaging service in India, Brazil, Mexico, Nigeria and South Africa. The Information, which got a more in depth look at Jana’s research, shows that Facebook Messenger usage is far, far lower in those same countries.

Now, is that massive international user base worth $19 billion? It’s hard for us to understand how it possibly could be. WhatsApp’s founders have pledged to keep the app ad- and gimmick-free, so there aren’t any indications that new revenue streams are coming. And, while the acquisition fits in perfectly with Facebook’s plan to expand its app offerings, the social network has promised to use the same hands-off approach it did with Instagram — leveraging its “expertise, resources and scale” to grow the platform, while keeping WhatsApp operationally independent.

Additional Reporting from Engadget

Papi Mabele
Tech enthusiast at heart. Lover of all things digital. Papi is the founder of SA Vibe and has been sharing his love for gadgetry since 2010. Papi sees no need for wearable tech in his busy schedule and considers the Xbox One as non existant. He may come across as bias at times, and still holds a grudge at BlackBerry for creating the 8520.