Facebook Turns Corner with Acquisition of Messaging System WhatsApp

3-14-14-FacebookIn a shocking move to outside observers, Mark Zuckerberg has given away approximately 8 percent of Facebook and forked over $4 billion to acquire WhatsApp.

The transaction occurs as Facebook experiences slower growth among its younger users.

WhatsApp, a startup company headquartered in California, offered Facebook ownership of the largest mobile messaging system in the world. It currently hosts more than 450 million users each month.  WhatsApp was created in 2009 by Jan Koum and Brian Acton.

Facebook is expected to pay $12 billion in Facebook shares, $4 billion in cash and $3 billion in stock units.

Unlike the leading social-media sites Twitter and Facebook, WhatsApp charges consumers for the services. WhatsApp currently has over 500 million consumers in 200 countries. For just 99 cents, users can send audio, video and other media messages, as well share their locations through an interactive map.

Acton and Koum brought together an engineering team of 50 people to develop the platform. On New Year’s Eve 2013, the platform hosted more than 54 billion messages.

The business model experienced so many early returns that Action and Koum openly critiqued Google, Facebook and other Internet services that are supported by advertisements.

In December 2013, Facebook reported 757 million worldwide users accessed the site daily, a record number. However, market research firm iStrategyLabs recently found that usage of Facebook by American teens fell about 25 percent in the last two years. Mark Zuckerberg and other Facebook executives have admitted that the company struggles to maintain its level of younger user in its most popular markets.

By contrast, WhatsApp has seen its user count soar by more than 50 million in the last two months (December 2013 – January 2014). In the last year, the number of processed messages has tripled.

The application is available on all of the leading smartphones, including Apple’s iOS, Google’s Android and those created by Nokia, BlackBerry and Microsoft.

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