How WhatsApp buyout will help Facebook in India
It’s $19 billion buyout of WhatsApp that will help Facebook expand footprint in emerging markets of Latin America and Asia, especially India, where the mobile instant messaging app is very popular.
Founded in 2009 by Ukrainian Jan Koum and American Brian Acton, Mountain View (California)-headquartered WhatsApp is a Silicon Valley start-up with over 450 million monthly users.
It allows users to exchange text, pictures and videos using smartphones. The app is very popular among youth across Europe, Latin America, parts of Asia including India, where Facebook is beefing up its presence.
Facebook founder and CEO Mark Zuckerberg said messaging is a “very competitive space” and WhatsApp is a “clear global leader”.
“It (WhatsApp) is in Europe, Latin America, India… Its kind of a clear leader,” he told analysts on a concall.
The focus will be on simplicity, speed and reliability and “something that does not clutter the app with features and over time, people will pay for that”, he added.
“WhatsApp has built a leading and rapidly growing real time mobile messaging service, with over 450 million people using the service each month, messaging volume approaching the entire global telecom SMS volume and continued strong growth, currently adding more than 1 million new registered users per day,” Facebook said.
Facebook CFO David Ebersman said the focus is now on growing the platform over the next five years.
“Considering that messaging in the number one activity on smartphones and the direct messaging business is about $100 billion globally for telecom carriers, our focus is on the next 5 years,” he added.
On the acquisition and monetisation, Zuckerberg said: “Our explicit strategy for the next several years is to focus on growing and connecting everyone in the world.
“WhatsApp has a strong presence internationally…but it’s a fragmented market with many competitors. Outpacing them right now is critical. Once we get to be a service with 1 billion, 2 billion, 3 billion people, there are many clear ways that we can monetise,” he said.
Koum, who expects the smartphone userbase globally to touch 5 billion in the next few years, said the alliance with Facebook will give WhatsApp “the flexibility to grow and expand, while giving me, Brian, and the rest of our team more time to focus on building a communications service that’s as fast, affordable and personal as possible.”
WhatsApp is the biggest acquisition till date for the Menlo Park-headquartered firm. In 2012, it had acquired picture-sharing app Instagram for about $1 billion. Last year, its $3 billion-bid to acquire photo sharing app Snapchat got turned down.
Facebook, which expects to close the deal his year, will pay WhatsApp $4 billion in cash, $12 billion in stocks and another $3 billion in restricted stock that vests over several years.