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What's Up With The Purchase of WhatsApp


WhatsApp (Photo credit: abulhussain)

WhatsApp's $19 billion price tag may have seemed excessive to some insiders, but Facebook might have actually gotten WhatsApp for cheap. Seriously, just see for yourself.

In most ways, WhatsApp's userbase is just the kind of customer Facebook is seeking out. A mobile messaging service that kind of functions as a social network,

WhatsApp users have the option to send messages to one or more recipients at the same time. WhatsApp is extremely active, sending more than 600 million photos a day; more photos than even uploaded Facebook photos. Also, 70% of WhatsApp users are active every day compared to 62% of Facebook users.

Related: Facebook buys WhatsApp for $19 billion

Crucially, WhatsApp has a strong presence internationally, specifically regions where Facebook is trying to grow its base. WhatsApp and other mobile messaging services are also widely used by teens and tweens. This is a group that Facebook has been losing to rival services and social networks alike.

In a number of ways, Facebook's purchase of WhatsApp mirrors its 2012 Instagram acquisition. WhatsApp may be actually be a better investment than most rivals: Facebook paid only $30 per Instagram user at the time. Facebook is spending $42 per user for WhatsApp. As we all know, Instagram grew exponentially.

Given WhatsApp's large user base, its purchase price may be a great bargain compared to its competitors. LinkedIn's share price values the company at $153 per user. Twitter currently trades at $140 per user, and Facebook at $123, and Snapchat trades at $50 per user.

WhatsApp is growing faster than other social networks: Looking at competitors alike, four years in, Facebook had only 145 million users, Google's Gmail had 123 million, Twitter had 54 million, and Skype, now owned by Microsoft, had 52 million users. If you look at the trends and compare, you can see that WhatsApp is a choice for the future.

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 Patrick Stevens
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