Maintaining high levels of user engagement is key for Facebook
as it enters middle age, and messaging apps like WhatsApp, Line,
KakaoTalk and Snapchat -- which Facebook tried but failed to
acquire for $3 billion late last year -- are chipping away at its
share of people's attention.
The acquisition is part of a long-term strategy to acquire some
of those social and mobile competitors. But it's not clear whether
the deal will do much to address teen engagement, which Facebook
has admitted is a problem for it in the U.S. The service is broadly
used as a stand-in for SMS texting in countries such as Spain and
Asked by an analyst about the age of WhatsApp users, Facebook
CFO David Ebersman remained a bit vague. "If you look at the
penetration that WhatsApp has achieved, it goes without saying they
have good penetration across all demographics, we'd imagine," he
said. "But it's not a service that asks you to tell them your age
when you sign up."
Facebook CEO Mark Zuckerberg touted the high engagement on
WhatsApp -- which allows users to send photos, videos and audio
recordings in addition to text -- during the conference call
Wednesday. He said that he expects WhatsApp to reach a billion
"WhatsApp is the only widely used app we've seen that has more
engagement and a higher percentage of people using it daily than
Facebook itself," he said.
He noted that Facebook has invested deeply in mobile messaging
products like Facebook Messenger, a standalone app, but that it's
not used for real-time conversations as an SMS stand-in the way
that WhatsApp is.
"We're going to invest in both to serve both use cases," Mr.
WhatsApp generates revenue on a subscription model by charging
users 99 cents per year after an initial year free. It has
previously eschewed advertising in no uncertain terms.
The company wrote in a blog post in 2012: "Advertising
isn't just the disruption of aesthetics, the insults to your
intelligence and the interruption to your train of thought ... when
advertising is involved, you the user are the product."
Users can expect WhatsApp to remain ad-free, according to
Messrs. Zuckerberg and Koum, who said that the strategy for the
foreseeable future would be to focus on product and user
"I don't personally think ads are the right way to monetize
messaging," Mr. Zuckerberg said.
Mr. Koum reiterated that WhatsApp -- which will continue to
operate independently -- will not focus on revenue sources beyond
its existing model. "We have the potential to have 5 billion users
giving us money through the subscription model," he said.
The deal is composed of $12 billion in Facebook stock and $4
billion in cash. An additional $3 billion in restricted stock units
are being set aside for WhatsApp's 50 employees and will vest over
a four-year period.