Facebook to Acquire Mobile Messaging Service for $19 Billion

Facebook has agreed to purchase mobile messaging company WhatsApp for $19 billion, in what marks the largest-ever acquisition of a company backed by venture capital. The deal, which comes in the wake of Facebook’s failed attempt to acquire messaging service Snapchat, includes $3 billion in restricted stock, $4 billion in cash, and $12 billion in Facebook shares. The deal easily outranks other notable startup acquisitions, including Facebook’s $1 billion purchase of Instagram, and Microsoft’s $8.5 billion Skype deal.

“The 55-employee company, which acts as a kind of replacement for text messaging, has seen its use more than double in the past nine months to 450 million monthly users,” reports The Wall Street Journal. “That makes its service more popular than Twitter Inc., the widely used microblogging service which has about 240 million users and is currently valued at about $30 billion.”

This deal is also a windfall for Sequoia Capital, the only VC firm that backed WhatsApp. “Sequoia invested about $60 million for a stake valued at up to $3 billion in the deal, according to a person familiar with the matter,” notes WSJ.

WhatsApp’s revenue is unclear, as its service is free for the first year of use, and charges 99 cents per year thereafter, and does not include advertisements. WhatsApp is extremely popular outside of the United States, so this acquisition could help Facebook tap into a new market.

The startup was founded in 2009 by Jan Koum and Brian Acton. The app reached 450 million users faster than any other company in history, and currently processes 50 billion messages a day. However, the company does not have any marketing or public relations employees.

The messaging service is appealing to consumers because it is extremely private, and deletes messages from the company’s servers after they are sent. This prevents government agencies from tracking individuals.

“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” said Mark Zuckerberg, Facebook founder and CEO. “I’ve known Jan for a long time and I’m excited to partner with him and his team to make the world more open and connected.”

“The acquisition supports Facebook and WhatsApp’s shared mission to bring more connectivity and utility to the world by delivering core Internet services efficiently and affordably,” suggests the press release. “The combination will help accelerate growth and user engagement across both companies.”

Related Stories:
WhatsApp’s Anti-Ad Philosophy is Really a Broad New Vision for Mobile, Quartz, 2/20/14
The Rags-to-Riches Tale of How Jan Koum Built WhatsApp into Facebook’s New $19 Billion Baby, Forbes, 2/19/14