Facebook Buying WhatsApp For $19B, Will Keep The Messaging Service Independent

WhatsApp is a messaging-service app, much like a text message, that allows users to send
text, video, and pictures to each other without having to actually pay for a text messaging service. WhatsApp has also recently announced that it is adding a voice service as well, putting more pressure on telecom companies.
Facebook isnt buying WhatsApp for its current revenue stream. The figure that matters most to Mark Zuckerberg is 450 million: the number of active users that WhatsApp says it has and any service with an enormous user base represents an outsized threat and an outsized opportunity.Dividing a companys active users by its market capitalization or fund-raising valuation, we find that Facebook deemed each WhatsApp user to be worth around $42.

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. Whatsapp success points: Whatsapp has built a leading and rapidly growing real time mobile messaging service. Over 450 million people use service each month 70% of those people active on a given day Messaging volume approaching the entire global telecom SMS volume Continued strong growth ,currently adding more than 1 million new registered users per day. Below are the top four social media stocks ranked by market capitalization.
MARKET CAPITALISATION (MILLIONS) NO. OF MONTHLY USERS(MILLIONS)

COMPANY

REVENUE (MILLIONS) $7870

FACEBOOK $ 173540

1230

LINKEDIN

$ 23530

277

$ 1530

TWITTER

$ 20130

243

$ 665

PANDORA

$ 7320

73

$ 655

In 2012, Facebook monthly users increased by more than 17%. In 2013, growth of monthly users slowed to 11%. Even more troubling is that the more profitable U.S. and Canadian demographic only had a 3% increase in users in 2013, compared with 5.5% increase in 2012.

In October 2013, for the first time, Facebook acknowledged many investors concerns that Facebook is experiencing slowing growth in daily users, especially in the key teen demographic. At this point, Facebook is starting to look like a mature blue-chip company that has mostly saturated its potential market share. As we have seen, Facebook is having trouble generating new users organically, which helps explain the recent purchase of WhatsApp for $19 billion. For those who have never heard of WhatsApp, keep in mind that it is not a huge player in the United States. It does, however, enjoy a large global presence outside the U.S., especially in emerging markets. WhatsApp is the most popular mobile-messaging app in emerging-market countries such as India, Brazil and Mexico. Even more impressive, WhatsApp dominates the market in Germany and Spain with 84% and 97% share, respectively. The $19 billion purchase price is the number on which everyone is focusing. Granted, it is a shockingly high number. However, in light of the above, the reasoning behind the purchase might make sense. WhatsApp currently has 465 million monthly active users a number higher than LinkedIn, Twitter or Pandora. Even more remarkable, WhatsApp is gaining one million new users every day. At that breakneck pace, it would increase monthly users by more than 80% in 2014 alone. The valuation seems to make sense when looking at its monthly users compared with Twitter and LinkedIn. Facebook is paying less for WhatsApp than the current market cap of LinkedIn and Pandora, yet it has more monthly users than either of them. CONCLUSION: why facebook would have a deal with whatsapp: 1. It bought whatsapp so that GOOGLE or any other company couldnt get their hands on it. 2. Whatsapp has more momentum and transaction than facebook 3. This deal can be termed as pure data mining acquisition as FB gets crucial mobile user data that it cannot get otherwise. If all goes well and if whatsapp gets two billion users (in two years from now) then facebook will start monetizing all the two billion users and it will get a huge revenue from the operation of the whatsapp service.