The tech world is in shock over Facebook’s latest big ticket purchase. But what exactly did the social media giant spend that exorbitant amount of moola on?
None other than WhatsApp, a mobile-messaging service that allows people with the app to communicate all over the world while avoiding SMS fees. According to Slate’s Will Oremus, though WhatsApp has been growing at an alarming rate (25 million new users sign up per month!), it may not be worth the large sum paid for it—but it could be worth it to Facebook, which is trying at all costs to avoid being wiped out by mobile-messaging services.
Perhaps from the standpoint of the U.S., where many haven’t even heard of the app, all those zeros are still wince worthy, but when you consider WhatsApp’s wild popularity all over the rest of the world, the numbers may start to add up.
Facebook just made its boldest business move ever, buying the mobile-messaging service WhatsApp in a deal worth some $19 billion in cash and stock. That’s six times what Google paid for Nest in January, and 19 times what Facebook paid for Instagram two years ago. It’s so much money that people found themselves reaching beyond the business realm for context. Development expert Charles Kenny compared the purchase price to the total annual lending of the World Bank.
The immediate reaction from the tech and business world was incredulity. “Do they also get the state of Florida?” one jokester asked.
As far as I can tell, Facebook does not get the state of Florida in the deal. What it does get is a five-year-old, Mountain View-based startup that has become one of the world’s most popular communication services in just the past year. WhatsApp was founded in 2009 by a pair of ex-Yahoo-ers who set out to build a better alternative to standard, SMS-based text messaging. It allows you to chat and shoot texts, pictures, and videos back and forth with friends over the Internet, like Apple’s iMessage, Microsoft’s Skype, BBM, or Facebook Messenger. Not only does WhatsApp have more features than SMS, it’s far cheaper—free for the first year, and just $1 a year after that. It’s particularly useful as a way to chat with friends and family overseas without running up big charges. It also has no ads, although that seems highly likely to change under Facebook ownership.
For more insight into the purchase, and maybe a chuckle or two, check out the BBC’s creative report, which uses the app to get across the message about what may happen to WhatsApp when Facebook takes over.