Facebook to purchase WhatsApp for $19B

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Facebook announced Wednesday that it is buying the mobile instant-messaging company WhatsApp for about $19 billion in a move that would expand the social network's global reach.

WhatsApp's mobile messaging service, which allows users to trade texts, pictures and videos over their smartphones, is extremely popular in countries including Brazil, India, South Africa and Indonesia -- places where Facebook is trying to broaden its footprint. More than 450 million people use the app every month.

Facebook is the most popular social network in the world, but it's trying to play catch up in the world of mobile messaging apps, where users increasingly use their smartphones to exchange messages, photos and videos.

Facebook has its own messaging service -- Facebook Messenger, which is popular in the United States, but it lags behind companies such as WhatsApp in other countries, where intense competition thrives among firms with names that aren't familiar to many Americans. In China, for instance, the messaging app WeChat is by far the most popular. In Japan, there's an app called Line.

These mobile messaging services function like a free text-messaging service over the phone. As on Facebook, users can set up profiles.

Much of Facebook's strategy hinges on growing internationally. Last year, the company saw more revenue come from outside the United States than inside. Domestic revenue from marketers and developers accounted for 46 percent of the company's revenue in 2012, compared with 51 percent the year before. "The change is due to a faster growth rate of international users and to the expansion of international sales offices and payment methods," the company said in its 2012 annual filing.

Most of the company's international revenue came from Western Europe, Canada, Australia and Brazil. By acquiring WhatsApp, Facebook automatically gains a stronger foothold in Africa and Asia, where the number of mobile users continues to expand rapidly.

"WhatsApp is on a path to connect 1 billion people," Facebook's founder and chief executive, Mark Zuckerberg, said in a statement Wednesday. "The services that reach that milestone are all incredibly valuable."

Facebook agreed to pay $4 billion in cash and $12 billion in Facebook shares for WhatsApp, which is based in Mountain View, Calif. WhatsApp employees and founders will receive an additional $3 billion in restricted stock. The acquisition is the biggest to date for Facebook, which bought the photo-sharing app Instagram in 2012 for $1 billion.

During a conference call with analysts Wednesday, Mr. Zuckerberg said Facebook plans to allow WhatsApp to operate independently, much as it has allowed Instagram to function largely as its own product.

As part of the deal, Whats-App's founder and chief executive, Jan Koum, will join Facebook's board of directors.

"WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide," Mr. Koum said.


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