February 20, 2014

Facebook announces $16 billion purchase of WhatsApp

Social networking giant Facebook recently announced its intent to purchase mobile messaging service WhatsApp for $16 billion. The company said that it would pay $4 billion in cash and $12 billion in stock for the service that currently has 450 million users and adds an average of 1 million more each day. 

"WhatsApp is on a path to connect 1 billion people," said Mark Zuckerberg, Facebook's CEO and founder, in a press release. "The services that reach that milestone are all incredibly valuable. I've known Jan [Koum, WhatsApp's CEO] for a long time and I'm excited to partner with him and his team to make the world more open and connected."

This is not Facebook's first attempt at trying to increase its influence in the mobile messaging sphere. Last year, the company attempted a technology merger with the mobile application Snapchat, but its $3 billion offer was rejected. 

Facebook's purchase of WhatsApp is the fourth-largest technology acquisition in the past 10 years. Zuckerberg said that he was willing to pay so much for the popular startup because of the almost unlimited potential of mobile messaging. Americans are increasingly using these services as an alternative to text messages relayed through a wireless carrier. They also provide an inexpensive way for people to communicate with friends and relatives in other countries. 

WhatsApp will remain an independent company. In a call with Wall Street analysts, Zuckerberg said that for the time being, his company's new acquisition would focus exclusively on growth. Once the service has more than 1 billion users, however, it may consider ways to generate a profit.