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Is WhatsApp Worth $19 Billion?

Why It's Not That Surprising Facebook Paid $19 Billion For WhatsApp

Oh how times have changed. Back in 2009, WhatsApp cofounder Brian Acton told his Twitter followers that he had been rejected from Facebook. Fast-forward a few years later, and the site just bought his company for $19 billion in cash and stock. And what about the other founder, Jan Koum? He was born in a small village in Ukraine, and after moving to California, he and his mother survived on government subsidies. In fact, Koum signed the deal with Facebook at the social services office in Mountain View, CA, where he used to pick up food stamps.

Compelling founder stories and all, $19 billion is a lot of money for a messaging app that's practically free. Is it worth it? Well, it was to rich-kid-on-the-tech-block Facebook, who could clearly afford it. But here are a few reasons we're not so shocked by the price tag.

There Are 450 Million Global Users

Facebook was quick to point out that WhatsApp was the fastest growing app after, well, Facebook. With 450 million users and 1 million more signing up every day, the mobile messaging app has double the user base of Twitter (which is valued at $30 billion). While many Americans have never heard of WhatsApp, it's insanely popular in Europe and South America, and according to one analyst firm: "In places like Brazil, Mexico, Spain, 25 percent of the time people spend on smartphones, they're spending in WhatsApp." It also helps that many of those people are young, a demographic Facebook is trying to keep on its platforms.

You Can Message Everyone, Everywhere on WhatsApp

Sure, Apple has iMessage and BlackBerry has BBM, but those Internet messaging services are limited. You can only iMessage your friend for free if you both have iPhones, for example. Not the case with WhatsApp, which works on various mobile devices. If you have heard of WhatsApp, chances are you've used it to keep in touch with friends in other countries. There are no extra charges for international messages.

It's Better Than Traditional SMS

WhatsApp is free to users in the first year, and then requires a $1 per year subscription to send unlimited messages, videos, pictures, and more. In addition to being able to message anyone for a nominal fee and minuscule data charges, WhatsApp has other product advantages. Sending images is snappy, and the group text functionality works with friends and family who have different types of phones. And if you switch cell carriers, travel abroad, or change phone numbers for any reason, your friends can always find you on WhatsApp. There are a various number of other competitors with similar functionalities, like Viber, Tango, or Text +, but WhatsApp has the network effect thanks to the high number of users already on it.

Facebook Doesn't Have a Mobile Operating System

While Facebook's own Messenger app is second only to WhatsApp, the company does not have a mobile OS. Apple has iOS and Google has Android, but Facebook's version, Home, a personalized Android home screen, failed. With everyone spending more and more time on their mobile devices, Facebook had to get serious about its strategy. And it appears that strategy will include owning the must-have, addictive apps, like Instagram, WhatsApp, and potentially Facebook's newly released news aggregator, Paper.

WhatsApp Is Letting People Share Content

Prior to inking the Facebook deal, WhatsApp was putting its own spin on helping content go viral. It partnered with sites like BuzzFeed to add a button to its content that easily lets readers share stories with WhatsApp contacts. Unlike the Facebook "like" button that posts to the news feed, these shares are person to person or to a small group. It's much more personal and potentially less spammy.

Of course, when it comes to monetizing WhatsApp, Facebook will face challenges. The WhatsApp founders are vehemently against overt advertising and collecting user data and have reaffirmed their commitment to those values following the sale. Perhaps they will push ad-reliant Facebook to diversify. For now, let's cheers to WhatsApp — where employees enjoyed Crystal Champagne yesterday following the sale announcement.

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