Facebook will acquire mobile messaging service WhatsApp in a deal worth $16 billion – $4 billion in cash and approximately $12 billion in Facebook shares.
Factoring in an additional $3 billion employee stock grant that will vest over four years, the deal value is more than 10% of Facebook's approximately $173 billion market cap, and makes the $1 billion Instagram acquisition look paltry by comparison.
This is not an ad play, both Facebook CEO Mark Zuckerberg and WhatsApp CEO Jan Koum made clear in a conference call with press and investors. "I don't personally think ads are the right way to monetize messaging services," Zuckerberg said.
Rather WhatsApp will continue to monetize through a subscription model that currently offers one year of free service, followed by a $0.99 annual charge.
But that's not to say the deal has no advertising implications.
With the buy Facebook gets a rapidly growing and highly engaged install base of more than 450 million monthly users around the world, 70% of whom are active on a given day. It has experienced strong growth in Europe, India and other Asia locales where Facebook has sometimes struggled to gain a foothold. What's more, WhatsApp is adding more than 1 million new users each day, and Facebook management expects its users to surpass 1 billion in time.