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Facebook To Buy WhatsApp For 19 Billion Dollars In Deal Shocker

posted 20 Feb 2014, 08:22 by Mpelembe   [ updated 20 Feb 2014, 08:23 ]

Mobile-messaging startup WhatsApp will be bought by Facebook for 19 billion dollars.

 (WHATSAPP)  Facebook will buy fast-growing mobile-messaging startup WhatsApp for $19 billion in cash and stock in a landmark deal that places the world's largest social network closer to the heart of mobile communications and may bring younger users into the fold.

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The transaction involves $4 billion in cash, $12 billion in stock and $3 billion in restricted stock that vests over several years. The WhatsApp deal is worth more than Facebook raised in its own IPO and underscores the social network's determination to win the market for messaging.

Founded by a Ukrainian immigrant who dropped out of college, Jan Koum, and a Stanfordalumnus, Brian ActonWhatsApp is a Silicon Valley startup fairy tale, rocketing to 450 million users in five years and adding another million daily.

Mark Zuckerberg, who famously closed a $1 billion deal to buy photo-sharing service Instagramover a weekend in mid-2012, revealed on Wednesday (February 19) that he proposed the tie-up over dinner with CEO Koum just 10 days earlier, on the night of Feb. 9.

WhatsApp was the leader among a wave of smartphone-based messaging apps that are now sweeping across North AmericaAsia and Europe. Although WhatsApp has adhered strictly to its core functionality of mimicking texting, other apps, such as Line in Japan or Tencent Holdings Ltd's<0700.HK> WeChat, offer games or even e-commerce on top of their popular messaging features.

The deal provides Facebook entree to new users, including teens who eschew the mainstream social networks but prefer WhatsApp and rivals, which have exploded in size as private messaging takes off.

How the service will pay for itself is not yet clear.

Zuckerberg and Koum on the conference call did not say how the company would make money beyond a $1 annual fee, which is not charged for the first year.

Zuckerberg and Koum said that WhatsApp will continue to operate independently, and promised to continue its policy of no advertising.