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Facebook to Buy WhatsApp for $16+ Billion

It's Facebook's largest M&A deal to-date.

Asa Mathat

Facebook plans to acquire the messaging service WhatsApp, the company announced on Wednesday.

The move marks the social giant’s biggest acquisition to date, as Facebook paid $16 billion in cash and stock for the company. In addition, the deal includes another $3 billion in restricted stock units for WhatsApp employees, which will vest over a period of time.

“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” Facebook CEO Mark Zuckerberg said in a statement.

It is perhaps a surprising end to the independence of one of Silicon Valley’s most desired messaging startups, which has been pursued by suitors such as Google and, for a very long time, Facebook. And in a landmark moment for the acquisition of a messaging app, the final price speaks to the extent to which Facebook is willing to go to grab real estate on mobile devices.

As one of the most credible threats to Facebook, WhatsApp’s numbers speak for themselves. The company has more than 450 million monthly active users on the platform, according to the company, with more than 70 percent of users returning to the app on a daily basis. It has doubled in size over the past year, and sees more than half a billion photos sent over the service on a daily basis. Additionally, more than 200 million voice messages are sent on the service daily, along with more than 100 million videos sent. The company is adding more than one million registered users on a daily basis.

The company said on December 31 users sent 18 billion messages and received 36 billion messages, a total three times larger than the year before. As of December, WhatsApp had only 50 employees working at the company.

As a result of the deal, WhatsApp co-founder and CEO Jan Koum will join Facebook’s board of directors.

The app itself is extremely simple: It helps people send messages to other users and groups. Users can also push-to-talk and share media.

However, the company set itself up in opposition to Facebook and other competitors early on, saying it did not want to be tainted by advertising.

At our Dive Into Mobile conference last year, WhatsApp CEO Koum related how after 10 years working at Yahoo, he developed a deep distrust of how ads corrupt the relationship between a company and its users. “The user experience would always lose, because you always had to provide a service to the advertiser.” That’s even more acute on mobile. “Cellphones are so personal and private to you that putting an advertisement there is not a good experience,” he said.

In that vein, WhatsApp began as a free app, then asked users for $1 per year after their first year of service. According to a blog post from WhatsApp investors Sequoia Capital, CEO Jan Koum keeps a note taped to his desk that reads “No Ads! No Games! No Gimmicks!” — emblematic of the company’s steadfast resistance to in-app advertising.

“We don’t want to promote anything, we don’t want to get in the way,” CEO Koum told my colleague Liz Gannes in an interview last year. “We want to be the communication platform of the 21st century.”

In a post to his personal page, Mark Zuckerberg said Facebook plans to keep the WhatsApp brand alive, while also keeping the app itself as standalone and separate from Facebook’s existing mobile messaging application, Facebook Messenger. As with Facebook’s purchase of Instagram, WhatsApp’s product roadmap will remain unchanged, Zuckerberg said, and WhatsApp’s team will continue to stay in Mountain View, where it currently operates.

“It would be pretty stupid for us to interfere in a big way,” CEO Zuckerberg said in a conference call with analysts on Wednesday. “We want to do this the same way we did Instagram, but obviously on a much bigger scale,” he said.

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