EconomyTechnology

Facebook to buy WhatsApp for $19bn

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Facebook announced Wednesday that it would pay at least $16 billion to buy WhatsApp, a text messaging application with 450 million users around the world.

But the cost of the deal could go beyond that, US media reports. It could rise to $19 billion, with the application’s employees and founders receiving an additional $3 billion in restricted stock units over the next four years, according to the New York Times.

The users of WhatsApp pay little or no money to use the application.

Facebook, in Menlo Park, Calif., will pay $4 billion in cash and $12 billion worth of shares for WhatsApp, the Times said.

The decision shows that Mark Zuckerberg, co-founder and chief executive of Facebook, is determined to keep his company a dominant social network on the Web.

Critics say the proposed price is too steep as the WhatsApp is less known in the United States, and it does not even sell advertising and has very litter revenue.

Facebook paid $1 billion in a 2012 deal for Instagram, the photo-sharing service. Critics at the time assailed the company for overpaying.

Late last year, Facebook unsuccessfully offered to pay $3 billion to buy Snapchat, another messaging service.

Zuckerberg appears to be willing to pay large amounts of money to purchase hot messaging technologies, which typically attract younger people than Facebook does.

“Facebook is constantly working to not lose anybody,” said Nate Elliott, an analyst with Forrester Research, as cited by the Times. “Sometimes that is them innovating on their own, sometimes that’s them mimicking competitors, and sometimes that’s them buying competitors.”

Facebook is now a 10-year-old social network with 1.2 billion users around the world. However, the company may lose some of its users, according to tech experts.

Buying WhatsApp could help Facebook gain access to younger customers who prefer communicating one-on-one or with very small groups rather than sharing information more widely.

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