Facebook today announced its $16 billion deal to buy mobile messaging startup WhatsApp.
The main aim is to expand the popularity of Facebook among teenagers and ensure more engagement with smartphone users.
Facebook said on Wednesday it will pay $4 billion in cash and about $12 billion in stock in its single largest acquisition.
In 2012, Facebook paid $1 billion for photo-sharing app Instagram. It had also reportedly offered $3 billion to acquire photo messaging service Snapchat.
WhatsApp is the social networking giant’s biggest acquisition to date.
As part of the deal, WhatsApp co-founder and chief executive Jan Koum will join Facebook’s board, and the social network will grant an additional $3 billion worth of restricted stock units to WhatsApp’s founders, including Koum, and employees.
Also, Facebook promised to keep the WhatsApp brand and service, and pledged a $1 billion cash break-up fee were the deal to fall through.
Why WhatsApp
WhatsApp has over 450 million monthly active users and is popular with people looking to avoid text messaging charges.
WhatsApp allows users to send messages over internet connections, avoiding text messaging fees. The company claims it is currently registering one million new users a day.
Facebook founder Mark Zuckerberg said he believed WhatsApp was on track to have a billion users, but insisted he had no plans to place advertising on WhatsApp’s interface, saying he did not think ads were the best way to make money from messaging systems.
Viber in $900 million deal
This is the second main deal in the mobile messaging space in the last two months.
Messaging app Viber has been bought by Rakuten, the owner of online retailer Play.com. The Japanese company will pay $900 million for the mobile application, which offers free calls and text messages from a mobile phone.
Rakuten, which also owns the Canadian e-reader Kobo, said the purchase would allow it to expand its digital content into emerging markets. Viber, which is based in Cyprus, has 300 million registered users.
Viber is particularly big in the Middle East. The US, Russia and Australia are also among its biggest markets.
Viber competes with other messaging apps such as Whatsapp, WeChat and Line.
Facebook faces challenges
Digital agency iStrategylabs used Facebook’s own social advertising data to extrapolate that three million US teenagers had left Facebook in the past three years.
It was echoed by earlier research conducted by the Pew Internet Centre research, which reported that teenagers were put off Facebook because of their parents.
Industry sources say teenagers are maintaining lower profiles on Facebook while spending the majority of their time on services such as WhatsApp or Snapchat.
