On Wednesday (2/19) Facebook Inc (NASDAQ:FB) announced it has entered into an agreement to acquire WhatsApp for a total of $19bn in a cash and stock transaction. WhatsApp’s $19bn purchase price represents 11% of Facebook’s market cap as of the close on 2/19. This compares with Instagram (acquired April 2012), which was roughly 1% of Facebook’s market cap as of its IPO ($38/ share).

This Week: Facebook Inc (FB) Buys WhatsApp, Hide Last Seen on WhatsApp

Hide WhatsApp’s Last Seen

According to a report published by NDTV, WhatsApp for Android users can now hide their last seen, below are few excerpts from the report:

The new reports say that the update for the Android platform will allow users to hide the ‘last seen’ notification from other users, with the choice of hiding it from everyone, from certain contacts, or only those not on the user’s phonebook.

This features has been available to iOS users for a while. It is now included under the privacy settings on the WhatsApp for Android app. Currently the new features are not available for download on the Google Play store.

A user can however download the apk file from the WhatsApp (Download Link) website.

Facebook’s WhatsApp acquisition details

Analysts think the acquisition of WhatsApp is strategically sound and will meaningfully strengthen Facebook Inc (NASDAQ:FB)’s already strong mind share on mobile. While monetization will take time, analysts at Stern Agee think the potential size of the user base and strong engagement on WhatsApp should ultimately lead to meaningful monetization. They also note that the global mobile messaging market is estimated to be more than $100B. The firm ‘Reiterates Buy’.

The Valuation of WhatsApp

Analysts reportedly recognize the acquisition’s price tag ($19 billion) will likely cause sticker shock to investors. However, they think WhatsApp’s already large user base (450M monthly active users [MAUs]), rapid growth (adding 1M users a day) and strong engagement (70% daily active users or ahead of Facebook Inc (NASDAQ:FB)’s ~62%) are metrics that are hard to match. While Twitter Inc (NYSE:TWTR) (TWTR- $55.50-Underperform) and WhatsApp are vastly different platforms, analysts at the firm note that WhatsApp’s user base is nearly 2x Twitter and growing at a significantly faster pace. Facebook Inc believes WhatsApp is on track to reach 1B+ users (up from 450M currently) in the next couple of years. In comparison, Twitter added a mere 9M users last quarter and reached 241M users by year-end 2013. TWTR is currently valued at more than $33B.

Background of Facebook, WhatsApp deal

Facebook Inc (NASDAQ:FB) has agreed to acquire the popular cross-platform mobile messaging service, WhatsApp, for $19B ($4B Cash, $12B in FB stock, and $3B in Restricted Stock Units). The stock portion amounts to slightly less than 8% of FB’s shares outstanding. WhatsApp is growing rapidly, adding over 1M new users per day and currently has over 450M MAUs and 315M DAUs (daily active users) worldwide. The service is particularly popular in Germany, Spain, many other European countries, Latin America, India, etc., while it is not as strong yet in Korea, Japan, and China where there is more competition.

Management believes that WhatsApp is on track to exceed 1B users worldwide. In terms of dollars paid per user, analysts estimate Facebook paid roughly $42 per monthly active user for  WhatsApp. This compares to Facebook Inc (NASDAQ:FB)’s own per-user valuation of roughly $140. WhatsApp’s engagement (DAU/MAU) of 70% exceeds Facebook’s engagement of 62%.

WhatsApp Monetization

WhatsApp is clearly in the very early stages of monetization as management’s entire focus currently is user growth and user experience. In the past year, WhatsApp did roll out a subscription service in certain geographies, though the adoption rate is unclear. WhatsApp’s CEO, Jan Koum, has categorically stated
that advertising will not be introduced on the platform and Mark Zuckerberg has also said that advertising would not be the right model for the messaging service.

Other interesting usage stats regarding WhatsApp include the following:

  • WhatsApp messaging volume is approaching the global SMS telecom volume (19B Sent and 34B received per day).
  • 600M photos uploaded per day; 200M voice messages sent per day; 100M video messages sent per day.
  • Greater than 100% year over year growth for all of these metrics.

Zuckerberg on Facebook, WhatsApp deal (via Conference Call)

Transcript:

Thanks, Deborah, and thanks, everyone, for joining us today on such short notice. I’m excited to announce that this afternoon we entered into an agreement to acquire WhatsApp. The combination of WhatsApp and Facebook will allow us to deliver new and engaging mobile experiences, connect many more people around the world, and achieve our mission of giving people the power to share and making the world more open and connected.

Over the last couple of years, Facebook has been on a journey towards becoming a mobile company. Our goal is to connect everyone in the world and to do this we’ve invested in delivering great mobile experiences like Instagram, Messenger and, of course, our core Facebook apps on iOS and Android. We’ve made great progress here and 945 million people now use our mobile products every month and 556 million of those people use them each day.

As I said in our last earnings call, our goal for Facebook over the next few years is to deliver a set of new mobile products that allow people to share any type of content with any set of people they want. We want to provide the best tools to share with different-sized groups in a different context and to develop more mobile experiences beyond just the main Facebook app, like Instagram and Messenger. This is where we see a lot of new growth as well as a great opportunity to better serve our whole community.

WhatsApp fits this vision perfectly. Then the combination with Facebook will help strengthen both services. WhatsApp is an extremely high-quality product with incredibly strong engagement and rapid growth. It doesn’t get as much attention in the U.S. as it deserves because its community started off growing in Europe, India, and Latin America but WhatsApp is a very important and valuable worldwide-communication network.

In fact, WhatsApp is the only widely-used app we’ve ever seen that has more engagement and a higher percent of people using it daily than Facebook itself. After doubling in size in the last year, more than 450 million people now use WhatsApp monthly and more than 1 million new people are signing up every day.

Based on our experience of building global services with strong growth and engagement, we believe WhatsApp is on a path to reach over 1 billion people worldwide in the next few years. Internet services that reach 1 billion people are all incredibly valuable and we believe WhatsApp will be as well.

Our focus will remain on connecting more people and increasing engagement but, over the long term, we look forward to seeing what the team can do to build a really great business. We expect them to bring the same quality and innovation they bring to the rest of the product and the successful subscription model they already have in place is a promising start.

As Facebook works to connect the entire world and to build the infrastructure for a global community, WhatsApp will clearly help accelerate our progress. Jan and the team have built a product that is simple, fast, reliable, and a really great experience for people. It’s a great model for our own mobile development process.

WhatsApp also complements our services and will add a lot of new value to our community. People use WhatsApp as a replacement for SMS to communicate with their contacts as well as small groups of people. Our communication products like Facebook Messenger and Chat are used mostly for chatting with your Facebook friends and often sending messages that aren’t necessarily real-time. These are both different and important use cases and we’re going to invest in both to serve both use cases better.

We’re committed to building and operating WhatsApp independently. Their product roadmap is very exciting and it’s not going to change. We will work hard together over the coming years to help WhatsApp grow even faster and reach many more people. As part of this, we expect that, over time, WhatsApp will help us make progress in our mission to connect the entire world through things like Internet.org, by supporting our goal of delivering basic internet services to everyone in the world at affordable prices.

Overall, I’m very excited about this deal and I think it will be great for the Facebook and WhatsApp communities as well as for both companies. WhatsApp had every option in the world so I’m thrilled that they chose to work with us. I’m looking forward to what we can achieve together and for the opportunity to develop great new mobile products that serve even more people around the world.

On a personal note, I’ve known Jan for a long time and I know that we both share the vision of making the world more open and connected through  the services we build. Jan’s team has done amazing work over the last five years and they should be really proud of everything they’ve accomplished.

I can’t wait for them to join the Facebook team and I look forward to partnering with them to continue achieving amazing things. I’m particularly happy that, as part of this deal, Jan has agreed to join the Facebook board and partner with me to shape the future of Facebook as well as WhatsApp.