Mark Zuckerberg’s Facebook has announced its plans to buy fast-growing messaging service Whatsapp in a $19 billion deal in cash and stock. This is an unprecedented purchase as the deal one can consider closest to this was done by Microsoft when they bought Skype at a price of $8.5. Incidentally, Facebook also took over Instagram at only $1 billion last year, while Japanese e-commerce company Rakuten bought Viber at a modest $ 900 million.
So, why would Facebook buy Whatsapp, and at this price?
Industry insiders and M&A experts say that Facebook acquisition of Whatsapp–even Instagram–suggests their inability to develop such good apps. This deal is more than the amount Facebook raised in its own IPO and has left investors worrisome.
Many recent news reports and jokes floating in cyberspace suggest that Facebook was turning into a network for the ageing. Its population of active teenage users was fast depleting. With the acquisition of Whatsapp, they are likely to get the attention of their young users as well.
Whatsapp is clearly leading many other messaging apps such as Line in Japan and WeChat. It has acquired a massive market in America, Asia and Europe.
Zuckerberg has also released an interesting statement to explain why Facebook would buy Whatsapp. WhatsApp will complement our existing chat and messaging services to provide new tools for our community. Facebook already has its own messaging app but it’s not widely used.