Facebook plans to acquire hit messaging app WhatsApp for $16 billion, in a deal that is said will help accelerate growth and user engagement across both companies, the company announced on Wednesday.
The deal is made up of $4 billion in cash and $12 billion in stock, and will give Facebook access to the 450 million people using the WhatsApp service monthly, with 1 million new sign-ups daily. WhatsApp will also garner Facebook's huge resources, including its large cash backing and infrastructure.
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"WhatsApp is on a path to connect 1 billion people," Mark Zuckerburg, founder and CEO of Facebook, said. "The services that reach that milestone are all incredibly valuable. I've known Jan [Koum, WhatsApp co-founder and CEO] for a long time and I'm excited to partner with him and his team to make the world more open and connected."
WhatsApp, technically called WhatsApp Messenger, uses your 3G or Wi-Fi to send and receive messages. It's available across iOS, Android, Windows Phone, and BlackBerry. Users can switch from the traditional SMS to WhatsApp to send and receive things like pictures, audio notes, and video messages. The first year is free, then costs 99 cents every year after.
Zuckerburg wrote on his personal Facebook page that the company will not interfere with the WhatsApp brand, and will allow it to keep operating. WhatsApp will remain separate from Facebook's Messenger app, which ironically, sits ahead of WhatsApp on the iTunes App Store. WhatsApp will remain at its Mountain View headquarters and keep with its same product roadmap.
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"WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide," Koum said. "We're excited and honoured to partner with Mark and Facebook as we continue to bring our product to more people around the world."
In addition to the $16 billion buyout price, upon closing the deal Facebook will give $3 billion in stock to WhatsApp employees - making the deal a total of $19 billion. If for some reason the deal were to be canned and not go through, Facebook would have to pay WhatsApp a sizeable break-up fee of $1 billion in cash.
Doing the maths, the deal equates to $40 for every WhatsApp user. The stock market isn't reacting positively to the announcement, with Facebook down 5 per cent in extended trading.
Facebook will be holding a conference call at 6pm EST for more information.