Facebook recently announced its acquisition of WhatsApp for $16B in cash and stock, plus another $3B in RSUs.1 The acquisition was not surprising; mobile messaging is clearly of systemic importance to any mobile platform (except according to Twitter). However, the terms of the acquisition elicited some surprise, given Facebook’s recently failed attempt to acquire SnapChat for a more modest reportedly $1B. Putting aside its valuation for now, we should realize that WhatsApp’s strategic value to Facebook is substantive:
When you put the $FB WhatsApp acquisition into a broader strategy to build and monetize an emerging market userbase it starts to make sense.
— Jon Milani (@jonmilani) February 20, 2014
One might be tempted to define the acquisition in terms of technology or intellectual capital (32 engineers); however, WhatsApp’s value to Facebook is properly defined as user acquisition. The messaging app boasts 450M monthly active users, with an estimated 315M daily active users. This puts WhatsApp almost on equal footing with Facebook in terms of its active mobile userbase. The significance of this position cannot be understated.