Facebook is paying around $35 for each of WhatsApp's 450 million users, though it has to be assumed that the majority of WhatsApp users will also be on Facebook. In essence, Facebook has instantaneously become the biggest threat to mobile operator revenue.
Facebook's deal to acquire WhatsApp for $16 billion (though it could rise to $19 billion) is not that surprising given that when mobilesquared conducted its OTT communication research for Tyntec last year, Facebook was one of the few major internet companies that mobile operators did not view as a major threat (see below). WhatsApp was viewed as THE threat by the majority of mobile operators included in the extensive research.
All that has changed overnight.
On the back of this acquisition, mobile operators will have a growing concern about the threat Facebook will pose their messaging revenues. Surely the question remains, how long until Facebook looks to acquire an OTT voice player.
Ratuken has just acquired Viber, and of course Microsoft has already snapped up Skype, which is also seen as a major threat by the mobile operators.
There has been much discussion about the key topics at next weeks MWC. I think it's safe to say that OTT, Facebook and WhatsApp have just completely rewritten the agenda for next week.
Here's what our research about Facebook revealed in 2013:
Only 7% of mobile operators view Facebook Home as a major threat to their revenues, yet 64% view Facebook Home as just another OTT service to contend with, and a further 29% of mobile operators do not believe Facebook Home poses a major threat to their revenues. Interestingly, not one mobile operator would like to partner with Facebook Home.
In fact, the view that Facebook Home is “just another OTT provider” as highlighted in the mobile operator survey was supported by additional mobile operator research. Their view is that Facebook has become a platform (or ecosystem) and communication is a service that is largely overlooked by its users, and has consequently never featured as part of the company’s core product set.
To access the OTT research and see the full analysis please click here and download the White Paper called OTT Services Blow Up the Mobile Universe. Operators Must Act NOW!
Here's wat Facebook had to say about it:
- Acquisition accelerates Facebook’s ability to bring connectivity and utility to the world
- Leading mobile messaging company will continue to operate independently and retain its brand
- WhatsApp co-founder and CEO Jan Koum to join Facebook Board of Directors
Facebook today announced that it has reached a definitive agreement to acquire WhatsApp, a rapidly growing cross-platform mobile messaging company, for a total of approximately $16 billion, including $4 billion in cash and approximately $12 billion worth of Facebook shares. The agreement also provides for an additional $3 billion in restricted stock units to be granted to WhatsApp’s founders and employees that will vest over four years subsequent to closing.
WhatsApp has built a leading and rapidly growing real-time mobile messaging service, with:
- Over 450 million people using the service each month;
- 70% of those people active on a given day;
- Messaging volume approaching the entire global telecom SMS volume; and
- Continued strong growth, currently adding more than 1 million new registered users per day.
The acquisition supports Facebook and WhatsApp's shared mission to bring more connectivity and utility to the world by delivering core internet services efficiently and affordably. The combination will help accelerate growth and user engagement across both companies.
"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Mark Zuckerberg, Facebook founder and CEO. "I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."
Jan Koum, WhatsApp co-founder and CEO, said, “WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide. We're excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world.”
Facebook fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook’s expertise, resources and scale. This approach is working well with Instagram, and WhatsApp will operate in this manner. WhatsApp’s brand will be maintained; its headquarters will remain in Mountain View, CA; Jan Koum will join Facebook’s Board of Directors; and WhatsApp’s core messaging product and Facebook’s existing Messenger app will continue to operate as standalone applications.
Upon closing of the deal, all outstanding shares of WhatsApp capital stock and options to purchase WhatsApp capital stock will be cancelled in exchange for $4 billion in cash and 183,865,778 shares of Facebook Class A common stock (worth $12 billion based on the average closing price of the six trading days preceding February 18, 2014 of $65.2650 per share). In addition, upon closing, Facebook will grant 45,966,444 restricted stock units to WhatsApp employees (worth $3 billion based on the average closing price of the six trading days preceding February 18, 2014 of $65.2650 per share). As of February 17, 2014, Facebook had 2,551,654,996 Class A and B shares outstanding plus approximately 139 million dilutive securities primarily consisting of unvested RSUs. The Class A common stock and RSUs issued to WhatsApp shareholders and employees upon closing will represent 7.9% of Facebook shares based on current shares and RSUs outstanding.
In the event of termination of the Merger Agreement under certain circumstances principally related to a failure to obtain required regulatory approvals, the Merger Agreement provides for Facebook to pay WhatsApp a fee of $1 billion in cash and to issue to WhatsApp a number of shares of Facebook’s Class A common stock equal to $1 billion based on the average closing price of the ten trading days preceding such termination date.