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25
Feb

Facebook Buys Whatsapp for $19 Billion in Cash and Shares

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On Wednesday, Mark Zuckerberg made a statement on Facebook announcing a deal worth $19 billion (£11.4 billion) to buy the popular messenger Whatsapp. This has been Facebook’s largest purchase to date, and hasn’t been short of criticism.

Was Zuckerberg right to buy?

Twitter has been going crazy with tweets branding the Facebook CEO as ‘brain dead’, but have they been too quick to judge? Nobody is denying that $19 billion is a rather large amount to pay for an app that’s estimated revenue amounted to $20 million in 2013. However, I can’t imagine that the decision to buy Whatsapp for such a large amount was one that was made lightly. Whatsapp claim to have 1 million new registered users every day, and is forecasted to have 1 billion users within the next few years. Whatsapp was founded in 2009, and in the 5 short years it has been available, has accumulated 450 million active monthly users, of which 315 million use it every day! This may have not been such a silly impulse buy after all.

This purchase has come after Facebook’s own messenger app didn’t quite catch on. Despite Facebook’s 1.2 billion users, Whatsapp messenger seemed to be favoured. That old saying ‘If you can’t beat them, join them’ springs to mind. Despite Zuckerberg’s enthusiasm for the future with Whatsapp in tow, Facebook’s shareholders didn’t seem to share that same enthusiasm when shares fell by $1.82 just after the deal was made.

It is speculated by some that the $19 billion purchase was the result of a somewhat damaged pride after an attempt to buy the popular photo messenger Snapchat for $3 billion was turned down. The BBC’s David Lee explains that “Facebook was reputationally damaged by the fact that they tried to buy Snapchat and were turned down”. He goes on to explain that by buying Whatsapp, Facebook has essentially bought a massive bank of users, and that Facebook were also criticised for buying Instagram for $1 billion in April 2012 – however, this turned out to be a very good buy indeed.

We bet Google now feels a little silly after last year reportedly making a bid for Whatsapp of $1 billion – only a dent in the offer that Facebook has made. This deal has left Whatsapp’s co-founders Jaun Koum and Brian Acton former Yahoo engineers jumping for joy, and maybe slightly smug. Facebook actually turned down Brian Acton for a job in summer 2009, but much to his disappointment he remained positive and tweeted: ‘Facebook turned me down… Looking forward to life’s next adventure’. His next adventure was soon to be a big one.

What does this mean for Facebook and Whatsapp users?

Despite Facebook’s promise to leave Whatsapp as a standalone app, some Whatsapp users have expressed their outrage about the two social media giants combining. Some are very sceptical about Facebook’s ‘nothing will change’ statement. In fact, one Twitter user tweeted: ‘If nothing is going to change, what will they do with it? Wait for the ads people’. The concern is that Whatsapp will soon be bombarded with adverts although these rumours have been addressed by Koum, who said the following: “We think that for our product, advertising is not necessarily the right way to go”.

One other concern which has not yet been addressed is that if you have previously refrained from sharing your mobile number with Facebook, this data will now be shared with Zuckerberg and co. Presumably the networking site now has access to 450 million user’s mobile numbers; this is not something which will be popular amongst the majority of data-conscious Whatsapp users.

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