Why Facebook paid $19 billion for WhatsApp

Facebook and WhatsApp logos are displayed on portable electronic devices
Facebook and WhatsApp logos are displayed on portable electronic devices.
Credit: Getty Images

Facebook has paid $19 billion for WhatsApp, the smartphone app that allows users to send text messages for free. How can an app be worth as much as Honduras’ entire economy, and much more than the economies of Jamaica and Nicaragua?

Metro spoke with Bryce Keane, founder and director of the London social media firm Albion Drive and co-founder of events firm 3beards.

Isn’t $19 billion too much money for a company that doesn’t make any money?

Let’s be honest, it’s a pretty crazy evaluation. Facebook already has a similar technology but not many users, whereas WhatsApp has 450 million users. Facebook is buying WhatsApp’s users and space.

But how is Facebook going make the money back?

It’s not buying WhatsApp to make money, but to enter a new market and capture an active user population that doesn’t use Facebook. A lot of young people use WhatsApp because they can’t afford text messages. And let’s be honest, somebody else already bought Skype and Viber. The messaging war is on.

Young people don’t use Facebook anymore so it’s trying to get them back…

This is a market that’s using the Internet in a different way. Whatsapp users browse Facebook for 10 minutes at night, but they don’t use it to message their friends on the go. That’s how they use Whatsapp.

Which young hot startup will be the next big acquisition?

Mind Candy, the company behind Moshi Monsters (characters popular among young girls), is one candidate.



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