Facebook agreed to buy messaging company WhatsApp for $19 billion in cash and stock, a blockbuster transaction that dwarfs the already sky-high prices that other startups have been able to recently command.
The demographics of WhatsApp's users were likely a draw for Facebook, said Rebecca Lieb, analyst at Altimeter Group. “This is clearly also a play at securing their base of younger users who are married to text messaging,” she said.
Equally enticing is the percentage of WhatsApp users who log onto the service at least once a day. That figure sits at 70%, even higher than Facebook's 61%. Such “engagement” percentages are valuable because the more users interact with a service, the more ads or other products can be sold to them.
Prioritizing privacy, an ad-free experience, and charging users a $0.99 yearly subscription fee, a team of 55 employees has created a product that has garnered 450 million users and is now worth $19 billion. Wow.