MENLO PARK, California — On February 19, Facebook announced it would buy WhatsApp for $19 billion. This shadows Facebook’s past acquisitions; it bought Instagram for only $1 billion. WhatsApp is a messaging service popular among mobile users outside the United States. Coupled with Facebook’s efforts to bring Internet access to the developing world, the WhatsApp acquisition secures Facebook’s domination of the exponentially growing usage of social media across the globe.
WhatsApp’s price tag is the most ever paid for a venture-capital-backed company. The$19 billion price gives the startup, which was founded in 2009, a valuation that is greater than Southwest Airlines and Sony.
What makes the price tag worthwhile for Facebook is the fact that in places like Brazil, Mexico, Spain, and a number of other markets you see extraordinary numbers. When people spend time on smartphones, 25 percent of they’re they’re spending in WhatsApp. WhatsApp is used by 72 percent of users everyday. In other words, 315 million people are actively using WhatsApp daily. And thanks to the rapid global growth of web-connected smartphones, WhatsApp had reached 450 million users much faster than any other web service, outpacing Facebook’s and Twitter’s growth.
WhatsApp lets users send text and photos to other WhatsApp users’ phones. Users outside the U.S. find this service as a cost-saving alternative to paying for SMS texts through their telecom provider. WhatsApp is free to use for the first 12 months and thereafter costs a mere 99 cents per year.
Facebook is on a quest to bring connectivity to “the next billion” people in the developing world, partly because the company has nearly maxed out its U.S. user base. In the last three years, Facebook launched its “Facebook for Every Phone” application and the Internet.org initiative. Facebook collaborated with many carriers worldwide to enable its social networking service to be featured on over 3,000 kinds of phones, ranging from the simple and cheap to the more capable and expensive.
In July 2013, Facebook announced that more than 100 million people are using the Facebook for Every Phone app every month. Profits from advertising are minimal for the time being, but Facebook is looking at the long-term potential after it establishes itself as the main marketing connection between consumers and producers in the developing world.
Currently, there are about 5.4 billion mobile phone subscriptions worldwide, with 483 million subscriptions from low-income countries and 2.6 billion from lower-middle-income countries. There are even 80 million mobile phone users in places where there is no access to the electrical grid.
The growth of Internet connectivity also compliments trends among countries like France, Estonia and Finland, who deem access to the Internet as a fundamental human right for their citizens. And because mobile phones have low infrastructure requirements, are easier to use, and are more affordable than other communication devices, mobile phone subscriptions in developing countries outpace those in developed countries.