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What's up with WhatsApp Facebook deal?

Thursday, February 20, 2014 - 02:04

Feb. 20 - Facebook's $19 billion deal to buy WhatsApp will place it closer to the heart of mobile communications. But as Sonia Legg reports some think the world's largest social network is paying a high price to bring younger users into the fold.

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It may be the world's fastest-growing mobile messaging startup, but is WhatsApp really worth $19 billion? The company only employs 55 people and Facebook is effectively paying $42 dollars for every WhatsApp customer. In pure monetary terms it's probably not worth it, says IG's Brenda Kellly. (SOUNDBITE) (English): BRENDA KELLY, MARKET ANALYST, IG, SAYING: "When you look at it in respect of what was offered for Snapchat which was a mere $3 billion it does seem a little over the offer price." The deal dwarves the $1 billion Facebook paid for photo-sharing app Instagram. But that's not the only reason Mark Zuckerberg wants WhatsApp. (SOUNDBITE) (English): BRENDA KELLY, MARKET ANALYST, IG, SAYING: "When you look at how much growth WhatsApp has managed to achieve over the last number of years from about 200m users to 450m users which is way more than the likes of Twitter I think it is a way for Facebook to engage the younger market it has been losing favour with over recent quarters." WhatsApp was founded by Jan Koum - a Ukrainian immigrant who dropped out of college. It went from zero to 450 million users in five years and now adds a million new customers every day. It leads the new wave of smartphone-based messaging apps. But Peter Thal Larson from Reuters BreakingViews says it's a fickle market. (SOUNDBITE) (English): PETER THAL LARSON, ASIA EDITOR, REUTERS BREAKINGVIEWS, SAYING: "That's the problem with these messaging apps - they are the hot thing, they have grown very quickly and people are wondering if maybe they can use this to maybe push ecommerce or maybe knit our other services together. But the questions is, how do you make money out of this and also what's to guarantee that people won't just switch onto some other messaging app when something else comes along." The deal involves $4 billion in cash and $15 billion in stock. That's more than Facebook raised from its own IPO and underscores the social network's determination to win the market for messaging. Zuckerberg says it will continue operating independently and he will keep WhatsApp's no ad policy. But how the service will pay for itself going forward isn't yet clear.

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What's up with WhatsApp Facebook deal?

Thursday, February 20, 2014 - 02:04