Beth Worthy
2/25/2014
An interesting business acquisition has occurred in the big, bad world of social media. Just last week, Facebook made the eyebrow-raising decision to acquire the group messaging app, “WhatsApp”. However, it’s not the general acquisition that brought many people to scratch their heads, but rather, the incomprehensible price tag attached to the deal. Facebook is reported to spend $12 Billion in stock, $4 Billion in cash, and $3 Billion in stock grants bringing the grand total for the latest expenditure to a staggering $19 Billion! Reports have said that this is the biggest deal the social media juggernaut has ever made.
So why would Facebook want to purchase such a seemingly simplistic app? Well for starters, one has to take a look at what exactly the app does to determine its apparent value. It is a messaging app that gives you the option to either send to one person or many people at a time. It also comes equipped with media and location-sharing capabilities. While the company itself generally gathers minimal revenue, it has an expansive user base which Facebook has recognized to be incredibly beneficial. Ceo and creator, Mark Zuckerberg said in a statement, “ WhatsApp is on the path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.” Furthermore, WhatsApp’s user database has grown way faster than its competitors over the same span of time.
Reports have also shown that the acquisition may have come as a result of Facebook’s struggle to acquire any valuable revenue from mobile devices which is something WhatsApp has absolutely no trouble with at all. One thing to note though is that while the overall expense of the purchase may seem like too much to some, Facebook has actually projected that it could be a great bargain. Facebook and WhatsApp users could have greatly resembled one another over time so if anything, the deal was a good way to avoid any possible means of competition.
