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Published: Friday, 2/21/2014 - Updated: 9 months ago

Facebook’s Zuckerberg knows what’s up with $19B WhatsApp deal

Deal underscores CEO's resolve to adapt to mobile upheaval

ASSOCIATED PRESS

SAN FRANCISCO — If Facebook Inc. hopes to remain the social networking leader, chief executive officer Mark Zuckerberg knows the company must follow the people. That realization compelled Mr. Zuckerberg to pay $19 billion for WhatsApp, a mobile messaging application that is redefining the concept of texting while its audience of 450 million users expands at an even faster clip than Facebook itself.

The deal sent shock waves through the tech industry because of the staggering price being paid for a four-year-old service that isn’t as well known in the United States as it is overseas, where WhatsApp has become a hip way to communicate instantaneously.

Although the amount of money involved is difficult to comprehend, the reason Facebook prizes WhatsApp is easier to grasp.

“This is a ‘go big or go home’ moment for Facebook,” said Benedict Evans, a former cell-phone analyst who is now a partner with the venture capital firm Andreessen Horowitz.

Just as he did nearly two years ago when Facebook bought photo-sharing service Instagram for $715 million, Mr. Zuckerberg is trying to ensure that his firm doesn’t get left behind as people move to the next trend.

And WhatsApp is what’s hot. The Mountain View, Calif., start-up has nearly twice as many users as the better-known short-messaging service, Twitter Inc. What’s more, WhatsApp is adding about 1 million users each day — more than even Facebook.

The rapid growth has convinced Mr. Zuckerberg that WhatsApp is bound to exceed 1 billion users within the next few years to give Facebook even more insights into what matters to people. Even at its size, WhatsApp is handling an average of 19 billion messages per day. Those daily messages include about 600 million photos. Facebook believes that WhatsApp’s messaging volume exceeds all the traditional texts sent through the networks of cell-phone carriers. Those short-messaging services, or SMS, generate about $100 billion in annual revenue while WhatsApp charges just $1 annually after the first year of free usage.

Mr. Zuckerberg, 29, late last year offered to buy Snapchat for $3 billion but was rebuffed, according to several media outlets and technology blogs that quoted unnamed sources. It took less than two weeks to put together the WhatsApp deal, he said.

deal, according to Mr. Zuckerberg.

While Facebook remains the world’s most popular hangout with 1.23 billion users worldwide, a lot of its audience turns to other mobile apps for reading news, sharing photos and sending messages.

The fragmentation is prompting Facebook to develop a suite of discrete apps. Facebook recently introduced an app for perusing news and is trying to become a bigger player in mobile messaging with the WhatsApp acquisition.



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