Is Facebook’s Price Tag for WhatsApp Justified?

According to Facebook’s chief executive Mark Zuckerberg, Whatsapp is worth even more than $19 billion, which Facebook has agreed to buy. At the Mobile World Congress in Barcelona, Spain, Mr. Zuckerberg stated that this mobile-messaging startup is a very great fit for Facebook. He said that almost half a billion people simply love using WhatsApp for messaging purposes and it was the most engaging application that they had seen existing on mobiles up till now. The stock and cash acquisition is going to be the biggest one that has been made by Facebook, which is the largest social network, and it will also be the most expensive acquisition of an internet company in over a decade.

With this deal, WhatsApp has been given the same valuation as that of Gap and it also gets about more than half of the market value of Twitter. Zuckerberg, who also mad the purchase of the photo sharing app Instagram in 2012 for $700 million has been working on adding applications such as news and messaging for courting users of smartphones and tablets. He said that Facebook would be helped by the WhatsApp deal in the way that it would be able to play a more prominent role in getting the people to connect with each other.

Users of WhatsApp are able to send messages through its service on mobile devices that are based on a variety of operating systems, which includes Google’s Android, Apple’s iOS, BlackBerry’s proprietary software and Microsoft’s Windows Phone. Unlike the traditional text messages for which consumers have to pay charges to cellular operators, WhatsApp can be used for free in the first year and has a cost of about 99 cents yearly from then on. The application is also in direct competition with WeChat that belongs to Tencent Holdings’ in China, Line in Japan, KakaoTalk in Korea and also Facebook’s own Facebook Messenger.

While not making a comment when asked if he would be interested in acquiring Snapchat, Zuckerberg asserted that after making such a large deal as that made with WhatsApp, they were probably done for a while. While there have been low revenues for WhatsApp, it would prove to be worth a lot more considering its strategic value and its huge potential of doubling users. Furthermore, it may actually be a good fit for Facebook. The founder of Facebook also stated that he was in the hunt for three to five phone companies as partners in his plans of helping billions of people in connecting to the internet.

As far as WhatsApp is concerned, it may be hugely popular, but its forays in the world’s biggest mobile market i.e. Asia have had mixed success. This has raised questions about whether the application will be able to sustain the explosive growth that was cited by Facebook Inc. in order to justify the heavy price tag of $19 billion attached to it. The deal is worth even more than the social network’s own IPO, but it is yet to be seen what it can do for it.

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