Rachel Metz

A View from Rachel Metz

Why Facebook Thinks WhatsApp Is Worth $16B

Facebook is paying much more for WhatsApp than it did for Instagram, but it’s getting more, too.

  • February 19, 2014

On Wednesday, Facebook announced the latest move in its quest for mobile social domination: it plans to buy popular messaging app WhatsApp for $16 billion in a cash and stock deal.

If that sounds like a heck of a lot of money, it should. Facebook says it will pay $4 billion in cash and $12 billion in stock for WhatsApp, which lets users avoid paying SMS messaging fees by sending messages to others straight through its app (the app works on a variety of mobile platforms: iOS, BlackBerry, Android, and Windows Phone). WhatsApp’s founders and workers will get an additional $3 billion in restricted stock units that vest during the four years after the deal is done, Facebook says.

You might be thinking, “That’s like 16 Instagrams!” Well, on the face of it, yes. Facebook spent $1 billion for Instagram back in 2012, when it was the hottest photo-sharing app around—at the time, it seemed like an obscene amount of money.

But Facebook obviously thinks WhatsApp is worth far more, and some of the numbers it shared about WhatsApp’s users indicate why. WhatsApp has 450 million monthly users, 70 percent of whom (310 million) use the service daily. Instagram, by comparison, currently has one-third as many monthly active users.

Facebook also noted that the number of messages being sent through the company’s service is “approaching the entire global telecom SMS volume” (according to telecom market researcher Informa, this was expected to total 19.5 billion last year). And the app continues to bring in over a million new users each day.

That’s the kind of growth that Facebook can’t ignore if it wants to remain a leader in social networking and communication, and the company knows it. As more and more users migrate to messaging apps like WhatsApp, it behooves Facebook to own the hottest of the bunch. Smartly, it’s keeping the WhatsApp brand, as it did with Instagram, which will probably help it keep up its growth.

But beyond the question of whether or not WhatsApp is worth the money Facebook is eagerly shelling out for it, another is bound to emerge as the acquisition moves forward: what’s the next WhatsApp?

Become an MIT Technology Review Insider for in-depth analysis and unparalleled perspective.
Subscribe today

Uh oh–you've read all five of your free articles for this month.

Insider Premium

$179.95/yr US PRICE

More from Connectivity

What it means to be constantly connected with each other and vast sources of information.

Want more award-winning journalism? Subscribe and become an Insider.

  • Insider Premium {! insider.prices.premium !}*

    {! insider.display.menuOptionsLabel !}

    Our award winning magazine, unlimited access to our story archive, special discounts to MIT Technology Review Events, and exclusive content.

    See details+

    What's Included

    Bimonthly home delivery and unlimited 24/7 access to MIT Technology Review’s website.

    The Download. Our daily newsletter of what's important in technology and innovation.

    Access to the Magazine archive. Over 24,000 articles going back to 1899 at your fingertips.

    Special Discounts to select partner offerings

    Discount to MIT Technology Review events

    Ad-free web experience

    First Look. Exclusive early access to stories.

    Insider Conversations. Join in and ask questions as our editors talk to innovators from around the world.

  • Insider Plus {! insider.prices.plus !}* Best Value

    {! insider.display.menuOptionsLabel !}

    Everything included in Insider Basic, plus ad-free web experience, select discounts to partner offerings and MIT Technology Review events

    See details+

    What's Included

    Bimonthly home delivery and unlimited 24/7 access to MIT Technology Review’s website.

    The Download. Our daily newsletter of what's important in technology and innovation.

    Access to the Magazine archive. Over 24,000 articles going back to 1899 at your fingertips.

    Special Discounts to select partner offerings

    Discount to MIT Technology Review events

    Ad-free web experience

  • Insider Basic {! insider.prices.basic !}*

    {! insider.display.menuOptionsLabel !}

    Six issues of our award winning magazine and daily delivery of The Download, our newsletter of what’s important in technology and innovation.

    See details+

    What's Included

    Bimonthly home delivery and unlimited 24/7 access to MIT Technology Review’s website.

    The Download. Our daily newsletter of what's important in technology and innovation.

You've read of free articles this month.