WhatsApp’s Whooping Price Tag

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The rival industrial realms like Facebook, Google, Amazon and Apple perpetually try to acquire small, but aggressive competitors. In that way, Facebook took a huge step on February 19th and brokered a deal with WhatsApp — popular, teen-centric Smartphone messaging service. The deal is said to be Facebook’s largest acquisition to date. I am not an expert on WhatsApp and don’t know much about the distinguishing qualities of one messaging service from other. But, from a vernacular perspective, it is incredible to note the fact that the social media giant is paying $16 billion (plus $3 billion in restricted stock grants) for an app (even for the Silicon Valley standards).

WhatsApp – run by only 32 employees – has 450 million users. The reasons were simple: no need for paying SMS charges for the phone companies; gives instant access to a relatively large group of youngsters. Recently, Facebook admitted that the young people are spending less time on their service and tools like WhatsApp has taken the messaging service to a new direction. Facebook has also failed to take over other popular teen-centric services like SnapChat. So, they had to raise their waning influence, strategically, to get back into the King-of-Internet game.

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Reaching 450 million users may not be considered as a big thing in this social media frenzied world. But, WhatsApp reached that whooping figure faster than any other company in history. Nine months ago, it had more users than Twitter (more than 200 million). 72% of its users are said to be active on it every day (without spending a dollar on marketing). It somehow has tapped into our appetite of personal communication. Another reason for its huge success is Jan and Brain’s unconventional approach to business: “No Ads! No Games! No Gimmicks!” – Fully focused on only building a pure messaging experience. WhatsApp also owes a lot to cloud computing, which has helped entrepreneurs to create globe-spanning enterprises on shoestring budgets.

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“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” said Mark Zuckerberg after acquisition. Like Instagram, it is said that Facebook will use WhatsApp mostly a standalone service. He has also assured that WhatsApp will continue to remain ad free and there won’t be any large changes in the principles. Facebook will hand over $4 billion in cash and 183 million ($12 billion) worth Facebook shares to WhatsApp. The additional $3 billion (in stock) will go to the founders of Whatsapp and its employees. Facebook, is itself valued at hundred and seventy billion dollars, so, it’s not such a crazy deal. However, it sends out a message that Facebook was desperate to make this acquisition, because it is slowly exhausting its potential.

Yeah, it’s a bit crazy to read that a Smartphone app gets sold for $16 billion, especially in a war to hold the attention of the most erratic audience (teenagers) of our world. But, at the same, it is exulting to think about these new-age independent billionaires.

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