Facebook is acquiring WhatsApp for the low, low price of $4 billion in cash, $12 billion in stock, and another $3 billion in RSUs for retention. My American readers may not be familiar with WhatsApp, which is a messaging app that is not terribly popular in the US, but is immensely popular everywhere else in the entire world. It has 450 million active users. What we might generously call its monetization scheme is to charge its users $1 per year, starting on year 2. So we can safely assume that it is very, very far from profitable.
This casts an interesting light on Facebook’s (rejected) offer to buy Snapchat for $3 billion. On the one hand, clearly Snapchat is right to imagine that $3 billion is not Facebook’s last word in acquisition offers. On the other hand, now that Facebook has paid a hefty price for one messaging system, are they really going to go back to Snapchat and make another offer (maybe! Snapchat and WhatsApp have fairly distinct userbases). Perhaps the gripping hand is that Snapchat will now look more desirable to other potential buyers.
The Whatsapp acquisition looks defensive and perhaps even a little bit frightened on Facebook’s part. It’s not obvious how they could integrate or monetize WhatsApp (indeed, they have not announced any integration plans). WhatsApp is a small company, so I presume that everyone there is now super-rich, and that the core team will slack off progressively through their retention period, and then all go buy small islands somewhere or whatever one does when one never has to work again, so it’s hard to see WhatsApp going through an amazing period of blossoming with its new resources (it’s also written in Erlang, which I don’t imagine Facebook has a lot of ready talent for waiting to be infused into the project). And the user-base is predominantly not people who have a lot of ready cash to spend by the standards of a US company. So it seems like Facebook basically just didn’t like the idea that somebody else might dominate messaging in “all the places that aren’t the US,” and paid a pretty penny to control that traffic.