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Facebook just bought 'What' for $19 billion?

Facebook made its boldest business move ever this week, buying the mobile-messaging service WhatsApp for $19 billion. That's six times what Google paid for Nest in January, and 19 times what Facebook paid for Instagram two years ago.

The immediate reaction from the business world was incredulity. "Do they also get the state of Florida?" one jokester asked.

As far as I can tell, Facebook does not get Florida in the deal. What it does get is a startup that has become one of the world's most popular communication services in just the past year.

WhatsApp was founded in 2009 by a pair of ex-Yahoo-ers who set out to build a better alternative to standard, SMS-based text messaging. It allows you to chat and shoot texts, photos and videos back and forth with friends over the Internet, like Apple's iMessage, Microsoft's Skype, BBM or Facebook Messenger.

Not only does WhatsApp have more features than SMS, it's far cheaper — free for the first year, and just $1 a year after that. It's particularly useful as a way to chat with friends and family overseas without running up big charges.

The downside is that you're limited to talking to people who have downloaded the app. The upside is that, unlike iMessage, it's available on Android as well.

For Facebook, part of WhatsApp's luster is that it has emerged as the most popular of a cadre of similar mobile messaging apps, including Japan's Line, China's WeChat, Korea's KakaoTalk and Canada's Kik.

Right now WhatsApp has just 55 employees. With Facebook's backing, it will have the resources to stay a step ahead of smaller competitors.

The speed of WhatsApp's rise so far has been stunning. Last April, it had 200 million users; it now boasts 430 million. Most of those are outside the United States. It's said to be wildly popular in countries ranging from Spain to South Africa to Israel to India.

Within the U.S., it's particularly popular among teens, a demographic that has soured on Facebook as a way to stay in touch. Teens clearly feel they can share things on WhatsApp, unlike Facebook, without their parents finding out about it.

But the app's appeal is hardly limited to young people. In a December blog post, WhatsApp co-founder and CEO Jan Koum boasted about some of the app's more TED-talk-worthy uses: "Doctors in India are using WhatsApp to instantly send electrocardiogram pictures of patients who've suffered heart attacks, saving valuable time and potentially lives. In the mountains of Madrid, rescuers used WhatsApp to locate and save lost hikers. And today, as I follow the unfolding political crisis in Ukraine, the place where I was born and lived until the age of 16, I can't help but hope that the next great WhatsApp story will be about people using the service to speak their mind and stand up for their basic rights.''

So, WhatsApp is a very promising and valuable startup. But is it worth $19 billion? To most people in the world, no way. But if you happen to be running a company that's valued at $173 billion and is terrified of losing its core business to mobile-messaging services, then you might start to think it's worth just about whatever you have to pay.

"Facebook turned me down. It was a great opportunity to connect with some fantastic people. Looking forward to life's next adventure.''

A tweet on Aug. 3, 2009, from Brian Acton. An engineer at Yahoo at the time, Acton was looking for a new job but struck out at both Twitter and Facebook. Now he can smile — he is the co-founder of WhatsApp, which Facebook just bought for $19 billion.

Facebook just bought 'What' for $19 billion? 02/20/14 [Last modified: Thursday, February 20, 2014 5:22pm]
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