>> Facebook Inc will buy fast-growing
mobile-messaging startup WhatsApp for $19 billion in cash and stock in a
landmark deal that places the world's largest social network closer to the
heart of mobile communications and may bring younger users into the fold.
>> The transaction involves $4 billion in
cash, $12 billion in stock and $3 billion in restricted stock that vests over
several years. The WhatsApp deal is worth more than Facebook raised in its own
IPO and underscores the social network's determination to win the market for
messaging.
>> Founded by a Ukrainian immigrant who
dropped out of college, Jan Koum, and a Stanford alumnus, Brian Acton, WhatsApp
is a Silicon Valley startup fairy tale, rocketing to 450 million users in five
years and adding another million daily.
>>"No one in the history of the world
has ever done something like this," Facebook Chief Executive Mark
Zuckerberg said on a conference call on Wednesday. Zuckerberg, who famously closed a $1
billion deal to buy photo-sharing service Instagram over a weekend in mid-2012,
revealed on Wednesday that he proposed the tie-up over dinner with CEO Koum
just 10 days earlier, on the night of Feb. 9.
>> WhatsApp was the leader among a wave of
smartphone-based messaging apps that are now sweeping across North America,
Asia and Europe. Although WhatsApp has adhered strictly to its core
functionality of mimicking texting, other apps, such as Line in Japan or
Tencent Holdings Ltd's WeChat, offer games or even e-commerce on top of their
popular messaging features.
>> The deal provides Facebook entree to new
users, including teens who eschew the mainstream social networks but prefer
WhatsApp and rivals, which have exploded in size as private messaging takes
off.
>> "People are calling them 'Facebook
Nevers,'" said Jeremy Liew, a partner at Lightspeed and an early investor
in Snapchat.
How the service will pay for itself is not
yet clear.
>> Zuckerberg and Koum on the conference call
did not say how the company would make money beyond a $1 annual fee, which is
not charged for the first year. "The right strategy is to continue to
focus on growth and product," Zuckerberg said.
>> Zuckerberg and Koum said that WhatsApp will
continue to operate independently, and promised to continue its policy of no
advertising.
>> "Communication is the one thing that
you have to use daily, and it has a strong network effect," said Jonathan
Teo, an early investor in Snapchat, another red-hot messaging company that
flirted year ago with a multibillion dollar acquisition offer from Facebook.
>> "Facebook is more about content and
has not yet fully figured out communication."
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