|
. | . |
|
by Staff Writers San Francisco (AFP) Feb 20, 2014
Facebook is betting huge on mobile with an eye-popping cash-and-stock deal worth up to $19 billion for Internet Age smartphone messaging service WhatsApp. The surprise mega-deal announced Wednesday bolsters the world's biggest social network -- which has more than 1.2 billion members -- with the 450-million-strong WhatsApp, which will be operated independently with its own board. It fits with Facebook founder Mark Zuckerberg's focus on being at the center of lifestyles in which billions of people around the world share whatever they wish over the Internet using smartphones or tablets. "Facebook works harder than any other social site to keep people coming back," said Forrester analyst Nate Elliott. "In the past year, they've focused much of that effort on mobile -- introducing Home and Paper, and upgrading both their Facebook and Messenger apps -- and this is another step towards keeping people engaged no matter where they are." Facebook promised that WhatsApp would remain independent and said it served a real-time communication need, while Messenger was used more in the style of email between members of the social network. WhatsApp is ideally suited to young people who increasingly prefer rapid-fire smartphone messaging to making calls or churning out email. Facebook has been eager to keep the devotion of young users who set trends and carry tech habits into the future. It is Facebook's biggest acquisition and comes less than two years after the California-based Internet star raised $16 billion in the richest tech sector public stock offering. Zuckerberg said that WhatsApp -- a cross-platform mobile app that allows users to exchange messages without having to pay telecom charges -- was worth the steep price because its blistering growth around the globe has it on a clear path to hit a billion users and beyond. "Services with a billion people using them are all incredibly valuable," Zuckerberg said while discussing the purchase price during a conference call with analysts. The deal came from a chat Zuckerberg had with WhatsApp co-founder Jan Koum, whom he described as a "valuable thought partner" and friend of many years. "Last Sunday evening, about 11 days ago, I proposed if we joined together that would help us really connect the rest of the world," Zuckerberg said. "He thought about it over the course of the week, came back and said he was interested." Silicon Valley-based WhatsApp started the year with 50 employees, most of them engineers, and the startup said that all of its stakeholders have approved the take-over. The purchase includes $12 billion in Facebook shares and $4 billion in cash. It calls for an additional $3 billion in restricted stock units to be granted to WhatsApp founders and employees that will vest over four years. - 'Powerful capabilities' - Koum, who joins Facebook's board under the deal, said: "WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide." The tie-up gives WhatsApp "the flexibility to grow and expand," he added. Zuckerberg and Koum, who both took part in the conference call, did not discuss details about WhatsApp revenue, saying the focus for the foreseeable future would be on growth, not making money. WhatsApp software is available for free, but after a year, users are asked to pay annual subscriptions of 99 cents each. - Bubble fears - The acquisition represents likely the biggest-ever price for a tech startup, trumping the $8.5 billion paid for Skype -- which allows users to make voice and video calls over the Internet -- by Microsoft in 2011. "The size of this deal is really massive and it will get people talking about a bubble," Greg Sterling at Opus Research told AFP. Sterling said the deal is a risk for Facebook because "in social media, you have a flavor of the month, and next year we might have another app with extremely rapid growth." "I think (the high price tag) comes from the frustration of not being able to buy Snapchat, and then there is the youth factor," Sterling added. It remained unclear how Facebook planned to eventually make money from WhatsApp. Roger Kay at Endpoint Technologies said WhatsApp has become one of the most popular mobile applications worldwide "because it allows you to message anybody anywhere for free." "It's not obvious how they can get $12 billion out of this but it's been clear for a while that WhatsApp is very interesting. It reminds me a little bit of Skype," Kay said.
WhatsApp deal shows Facebook push to stay on top Analysts say the staggering price tag of up to $19 billion in stock and cash highlights Facebook's drive to be more mobile, global and to remain innovative. "It shows the continued determination of Facebook to be the 'next' Facebook," says Benedict Evans, a partner in the venture capital firm Andreessen Horowitz. Evans said Facebook is responding in part to the explosion of mobile social apps and wants to assert itself as the dominant platform. "Any smartphone app is just two taps away," Evans says in a blog post. "So It's quite possible mobile social will have lots of services indefinitely. This creates opportunities, but also a pretty basic challenge to Facebook." Still, the news left many observers stunned that Facebook would pay such a steep price at a time when the world's biggest social network seemed to be riding high. "The size of this deal is really massive and it will get people talking about a bubble," Greg Sterling at Opus Research told AFP. Sterling said the deal is a risk for Facebook because "in social media you have a flavor of the month, and next year we might have another app with extremely rapid growth." "I think (the high price tag) comes from the frustration of not being able to buy (the messaging service) Snapchat, and then there is the youth factor," Sterling added. "Facebook really needs to have vehicles to attract younger users, and Instagram is not going to do that by itself." With this strategy, Sterling said Facebook "is becoming a kind of holding company for different social media properties that appeal to different groups." Jim Goetz at the venture firm Sequoia Capital, an early WhatsApp investor which is getting a huge return, said the price makes sense because "WhatsApp has completely transformed personal communications, which was previously dominated by the world's largest wireless carriers." Goetz noted that WhatsApp, which allows users to bypass telecom charges for messaging, is "so widely loved overseas and so under appreciated at home." He said WhatsApp has grown faster than any similar company to 450 million users and has just 32 engineers. The business model is simple -- no advertising, and users are charged $1 per year after the first year, which is free. This has resonated with users around the world, in places ranging from Botswana to China. The mega-deal announced on Wednesday bolsters the world's biggest social network -- which has more than 1.2 billion members -- with WhatsApp, which will be operated independently with its own board. Facebook founder and chief Mark Zuckerberg said that WhatsApp was worth the money because its blistering growth around the world has it on a clear path to hit a billion users. "Services with a billion people using them are all incredibly valuable," Zuckerberg said while discussing the purchase price during a conference call with analysts. The purchase includes $12 billion in Facebook shares and $4 billion cash. It calls for an additional $3 billion in restricted stock units to be granted to WhatsApp founders and employees that will vest over four years. Roger Kay at Endpoint Technologies said WhatsApp has become one of the most popular mobile applications and "reminds me a little of Skype." Kay said the deal makes sense on one level because of Facebook's record stock run-up. "When you have a stock like that which has run up quickly and created a lot of paper value, it's good to trade that for other value," he told AFP. Forrester Research analyst Nate Elliott said Facebook gets a fresh infusion of youth but much more with the deal. "It'll be tempting to read this as a sign Facebook is scared of losing teens," Elliott said. "But the reality is, Facebook always works hard to keep all its users engaged, no matter their age. Facebook is tireless in its efforts to keep users coming back. That's why their 1.2 billion monthly users keep visiting the site more and more frequently, rather than drifting away."
Related Links Satellite-based Internet technologies
|
|
The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. All websites are published in Australia and are solely subject to Australian law and governed by Fair Use principals for news reporting and research purposes. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA news reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement, agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement All images and articles appearing on Space Media Network have been edited or digitally altered in some way. Any requests to remove copyright material will be acted upon in a timely and appropriate manner. Any attempt to extort money from Space Media Network will be ignored and reported to Australian Law Enforcement Agencies as a potential case of financial fraud involving the use of a telephonic carriage device or postal service. |