In Menlo Park today, the 800-pound social networking gorilla announced today that it would acquire popular messaging app WhatsApp for a cool $4 billion in cash and $15 billion in Facebook stock. The cash deal alone makes it Facebook's biggest acquisition yet, or about four times what the company paid for Instagram in 2012.
Like other messaging apps, WhatsApp allows users to ditch regular text messages, which are a boon for cellular carriers, and send messages for free over their smartphone's data plan instead. WhatsApp currently boasts 450 million users worldwide and claims it is adding 1 million new users per day. You would be forgiven if you hadn't heard of it though, a large portion of the user base is outside the U.S., although it is also surprisingly popular among the Hasidim in New York. [Update: Boing Boing has an excellent explanation of why the app is so popular and mostly unheard of in the states.]
The deal is certainly a win for the 55-person company: CEO Jan Koum will join Facebook's board, but the company will operate independently in their Mountain View offices just down Highway 101 from Facebook HQ. Facebook's own Messenger app will stay live as a separate entity. The deal still requires regulatory approval, but even if it doesn't go through, Facebook will still owe WhatsApp a $1 billion breakup fee and $1 billion worth of Facebook stock.
In a statement, Mark Zuckerberg said, "WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.” Sean Parker, meanwhile, could not be reached for comment on whether $19 billion was cool or not.
Update: In an amazing bit of reporting, the New York Times claims that after two years of negotiations, shared meals and "walks in the rolling hills of Silicon Valley," Koum and Zuckerberg finally worked out the deal last weekend at the Zuckerberg homestead. From the NYT:
[WhatsApp CEO Jan] Koum came over to Mr. Zuckerberg’s home, crashing the dinner Mr. Zuckerberg was sharing with his wife, Priscilla Chan. The two men entered into negotiations, eating a plate of chocolate covered strawberries intended for Ms. Chan, the people briefed on the matter said.
By last weekend’s end, the two men had struck a deal.