Facebook’s purchase of messaging service WhatsApp — at a price tag of up to $19 billion — is its largest acquisition yet. To put things in perspective, the social giant tried to purchase Snapchat for a fraction of that cost — $3 billion. And it successfully bought Instagram for $1 billion.
But at $19 billion, WhatsApp’s value tops that of major corporations: For instance, Southwest Airlines is worth $15 billion.
Facebook’s official statement lays out some of its reasoning. WhatsApp, which lets users send text and photos to other WhatsApp users’ phones for $1 a year, is seeing the messaging volume on its platform approaching that of the “entire global telecom SMS volume.”
Facebook’s filing with the Securities and Exchange Commission says 70 percent of its 450 million users are active on any given day, meaning 315 million people are using WhatsApp daily. So if Facebook users burn out on exchanging information through traditional walls and feeds, the company’s betting we will always need some mechanism to send messages back and forth.
There’s also Facebook’s quest for bringing connectivity to “the next billion” people in the developing world, partly because the company has nearly maxed out its U.S. user base. Facebook says:
“The acquisition supports Facebook and WhatsApp’s shared mission to bring more connectivity and utility to the world by delivering core Internet services efficiently and affordably. The combination will help accelerate growth and user engagement across both companies.”
And research suggests Facebook is buying itself a market of users in precisely the international markets it’s seeking. “In places like Brazil, Mexico, Spain, and a number of other markets you see extraordinary numbers. Twenty-five percent of the time people spend on smartphones, they’re spending in WhatsApp,” Forrester research analyst Charles Golvin told Buzzfeed last May.
This is a marriage both companies seem excited about, though they are two distinct company cultures. Facebook makes the bulk of its revenue from ads, while WhatsApp promises “absolutely no ads interrupting your communication.”
As part of the deal, WhatsApp is going to operate independently and keep its brand. WhatsApp said in a statement that “nothing” will change for its users as a result of the deal.