Facebook acquisition of Whatsapp
Facebook is a social networking company, it is founded by Mark Zuckerberg
with his friends in 2004 when he was a student of Harvard university. At the
start, the website was limited to the university, but then with passage of time
the serving area increased all over the globe. 1.59 billion people on average log
onto facebook daily
Whatsapp a text messaging app widely used across the globe. It was founded in
2009 by Brian Acton and Jan koum, former employees of Yahoo! after leaving
Yahoo! In September 2007, it is an ad- free app that allows user to send
unlimited messages to contacts, the app is free to download and provides an
alternative to cell provider’s traditional text messaging platform. In 2016 it stole
headlines with its initial bid of of $16 billion from facebook.
When whatsapp announced its plan to acquire whatsapp in 2014. Whatsapp’s
founder attached a purchase price of $16 billion; $4billion in cash and $12
billion remaining in facebook shares. This price tag is dwarfed by the actual
price facebook paid $21. Billion or $55 per user, facebook agreed to pay 19.6
billion adding 3.6 billion to the original price as compensation to whatsapp
employees for staying on board at facebook. In the meantime facebook share
prices soared to $77.56 from $68 by the time regulatory approval process
concluded in October. By then the the agreed upon 184 milion shares inflated
the final scale by an additional 1.7 billion
Instagram
It was created by Kevin Systrom and Mike Kriger in 2010. In 2012 Facebook
announced the acquisition of Instagram a photo sharing app for $1 billion in
cash and stock . At the time of acquisition Instagram has 30 million users and
Zero revenue. After its launch in 2010 , Instagram rapidly gained popularity
with 1 million registered users within 2 months, and 10 million in a year . 1
billion users as of May 2019 and many analyst believe it will soon be a multi
billion dollar advertisement business
WHY WHATSAPP AND INSTAGRAM?
Whatsapp is by far facebook’s largest acquisition and is 20 times larger than
facebook’s Instagram acquisition. The answer is whatsapp’s user growth , over
500 million people use whatsapp monthly and the service currently adds more
than 1 million users per day, 70% of whatsapp users are active daily, compared
to facebook’s 62% at the time of acquisition. Instagram was much cheaper (just
$1 billion, compared to a net price of around $22 billion for Whatsapp). It has
gone from 30 million daily active users at acquisition over 500 million
today(with another 300 million that use it at least once a month). It is
contributing around $1 billion per quarter in revenue. Currently whatsapp has
1.5 billion active users over 180 countries and is the third most downloaded
android app in the world, there are 3 million companies using whatsapp
business app. Whatsapp will fuel facebook growth in developing market where
internet connectivity is sparse but where whatsapp is widely used, whatsapp will
help facebook gain those market and the mobile users. Connecting to
whatsapp’s users in these areas will aid facebook’s Internet.org initiative,
facebook CEO Mark Zuckerberg’s plan to implent internet access to the two
third of the world not yet online.
Which acquisition has been the most profitable for
Facebook
Instagram was much cheaper (just $1 billion, compared to a net price of around
$22 billion for Whatsapp). It has gone from 30 million daily active users at
acquisition over 500 million today(with another 300 million that use it at least
once a month). It is contributing around $1 billion per quarter in revenue.
Whatsapp in contrast hasn’t been meaningfully monetized yet. Just as in early
facbook, the focus has been on mostly growth. Monthly active user has doubled
from when the deal closed, most of whom live in emerging countries where
facebook can layer additional needful services on the base platform. In
conclusion Instagram was a bargain that’s turned a very tidy profit. Whatsapp
was a very different sort of bet which is focused more towards growth.
CONCLUSION
Whatsapp and Instagram play a significant role in the global areas crucial to
facebook growth. Facebook is focusing on the future of international,cross
platform communications through the acquisition of whatsapp and Instagram.
Facebook CEO Mark Zuckerberg has stated in 2010 that “We have not once
bought a company for the company. We buy companies to get excellent people.
In order to have a really entrepreneurial culture one of the key things is to make
sure we are recruiting the best people. One of the ways to do this is to focus on
acquiring great companies with great founders.”
