FB acquires WhatsApp for $20b
THE frenzy to acquire fast-growing technology start-ups reached new heights on Wednesday as Facebook announced its largest acquisition, saying it would pay at least US$16 billion (S$20 billion) for WhatsApp, a text-messaging application with 450 million users who pay little or no money for it.
The eye-popping price signals the lengths Facebook co-founder and chief executive Mark Zuckerberg will go to protect his company's turf as the dominant social network on the Web.
Facebook has promised that WhatsApp would remain independent, saying it served a real-time communication need, while its chat platform, Facebook Messenger, was used more in the style of e-mail between members of the social network.
The company has struggled to gain traction in the message space. While Facebook Messenger is popular with users, recent attempts to create its own direct-messaging service have failed.
Facebook will pay US$4 billion in cash and US$12 billion worth of shares for WhatsApp. But the ultimate cost of the deal could rise to US$19 billion, with WhatsApp employees and founders potentially receiving an additional US$3 billion in restricted stock units, which would vest over the next four years.
The deal dwarfs the US$1 billion that Facebook paid for photo-sharing service Instagram.
The price is also much higher than the US$3 billion that Facebook offered unsuccessfully to acquire Snapchat, another messaging service, late last year.
But Mr Zuckerberg is clearly willing to spend big to acquire hot messaging technologies which typically attract younger, more tech-savvy people than Facebook does.
The acquisition also reflects a new strategy at Facebook: The company intends to acquire or build a family of applications, instead of simply buttressing its core social network.