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What message is Facebook sending with Whatsapp deal
In Mark Zuckerberg’s seemingly endless quest to converge consumers’ online and mobile activity, Facebook has announced a $19 billion acquisition of WhatsApp Inc.
The multi-billion dollar deal is comprised of: $12 billion in stock, $4 billion in cash and $3 billion in restricted shares. With 450 million monthly active users, the deal values each individual WhatsApp user at $42. Twitter, one of Facebook’s largest rivals, currently has 241 million monthly active users and is valued at over $30 billion.
The acquisition of WhatsApp helps Facebook enter into the mobile marketplace while simultaneously eliminating one the company’s largest potential competitors. The messaging app currently dominates the mobile market, adding roughly 1 million new users daily with the prospect of reaching 1 billion users in the near future. WhatsApp attracts the coveted teenage and young adult target market, one that is rapidly evading Facebook.
As Facebook struggles to attract younger users, the company has implemented a strategy devoted to acquiring various platforms that reach a more diverse demographic audience such as Instagram. The underlying focus behind this stagey is targeting companies that appeal to mobile and tablet users.
Although the $19 billion valuation of WhatsApp may appear extreme, the terms of the deal represent little risk for Facebook. The majority of the deal consists of $12 billion in Facebook stock, which the company is more than willing to issue given the company’s current evaluation. This funny money represents a marginal upfront cost.
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Tags: apps, equity, equity strategy, facebook, facebook revenue, facebook shares, facebook stock, facebook users, instant, markets, messaging, mobile, mobile app, mobile phone, mobile phones, mobile sector, mobile technology, online, online trading, tech, technology, valuation, whatsapp