Facebook Acquisition of WhatsApp

A STRATEGIC MOVE

Author Name
MAY 6, 2018 | UNIVERSITY NAME
CONTENTS

Facebook Acquire WhatsApp ............................................................................................. 2

1 Task One: A Premium Strategy .................................................................................... 2

1.1 An Overpriced Acquisition ................................................................................... 2

2 Task Two: Why Facebook Choose to Acquire WhatsApp........................................... 3

2.1 Previous Acquisitions............................................................................................ 3

2.2 Why Facebook acquired WhatsApp ...................................................................... 4

3 Task Five: All About Facebook.................................................................................... 5

3.1 Competitors of Facebook ...................................................................................... 5

3.2 Facebook avoids the threats from Google ............................................................. 5

3.3 SWOT Analysis..................................................................................................... 6

3.3.1 Strengths .......................................................................................................... 6

3.3.2 Weakness ......................................................................................................... 6

3.3.3 Opportunity ..................................................................................................... 6

3.3.4 Threats ............................................................................................................. 6

References ........................................................................................................................... 7
 FACEBOOK ACQUIRE WHATSAPP

Facebook was encountering accomplishment with smart phones, posting record income
and client commitment insights. In 2014, the organization was overdoing it on an overpriced
acquisition of cross-stage informing application of WhatsApp for $19 billion. Facebook having a
chance to develop in the portable segment, as its stage obviously represents 1 of like clockwork of
client time spent on phones, but the cost spent on acquisition for WhatsApp was high contrasted
with the value it could concentrate, and prompt generous weakening for Facebook's investors.

1 TASK ONE: A PREMIUM STRATEGY

Acquisition of WhatsApp by Facebook is one of the greatest acquisitions in the industry of

tech. Figures mentioned don't lie; the cash price was four billion dollars and in stock it was twelve
billion dollars (Facebook's stock as 8.5%) in addition to restricted shares three billion dollars. This
means an amazing $19 billion dollars. At that time, appropriately Facebook was wary about
crushing cash from WhatsApp. The calling application of smart phones dropped their minor
membership charges, which was WhatsApp's just source of income. Officials have talked in
general terms about how WhatsApp could profit by associating organizations with their users.

1.1 AN OVERPRICED ACQUISITION

Messaging volume of WhatsApp is quickly moving toward the worldwide messaging
volume of telecom, for each day that ratio is as 19 billion messages are being sent and million are
gotten. Client of WhatsApp are engaged in transferring six hundred million photographs, two
hundred million voice messages, and one hundred million video messages each day. (Cosentino,
2015 ) Facebook significantly invested more for WhatsApp contrasted with other late acquisitions
of Web and versatile applications for online Communication support. The arrangement proved be
an awful thing for Facebook investors and took the organization years to get a payback.

Facebook paid four billion dollars in real money and issued millions of offers worth twelve
billion dollars to WhatsApp and likewise paid an extra $3 billion to WhatsApp's authors and
representatives as 46 million confined stock units that has vest more than four years. (Faruk, 2014
) WhatsApp's prime supporter and Chief, joined Facebook's governing body, and after that
arrangements were closed, WhatsApp's investors and authors claimed about 7.9% of Facebook.
WhatsApp accelerated Facebook's desire to associate individuals around the globe, yet the sticker
price of $19 billion appears to be exceptionally elevate. Facebook presented its investor significant
weaken, as the organization issued around 230 million new offers. (Faruk, 2014 )

WhatsApp's rival in the Web and smart phones interchange apps; Viber, was acquired by Japanese
online business firm Rakuten. Viber had 280 million worldwide clients and was obtained by
Rakuten for $900 million. At the end of the time, Viber was valued at generally $3.20 per client.
Unexpectedly, procurement of Facebook for WhatsApp valued the firm at $42.20 per client,
accepting the maximum tag of $19 billion for WhatsApp's 450 million clients. (Donald, 2014 )

2 TASK TWO: WHY FACEBOOK CHOOSE TO ACQUIRE WHATSAPP

An advertisement free portable application WhatsApp, that enables users to send countless
messages to friends and family contacts without utilizing the remote system or maintaining
information charges. The application is allowed to download and is a contrasting option to the cell
supplier's conventional content informing stage. At the point Facebook reported organizations
intends to acquire WhatsApp in February 2014, authorities of WhatsApp connected a Sixteen
billion Dollar price tag: four billion dollars cash and twelve billion dollars Facebook shares
staying. This price tag was predominated by the genuine value paid by Facebook as nineteen billion
dollars or $55 per user. (Deutsch, 2015)

2.1 PREVIOUS ACQUISITIONS

Acquisition methodology by Facebook centers around three territories: the acquiring of
new capacity, acquirement of new developments, and buying out the restriction. Facebook has
obtained 42 associations since 2007. A web-working structure Parakey, that makes picture, video,
and making trade to the web less requesting, was first securing by Facebook. Facebook purchased
the association for an undisclosed aggregate in 2007. Thusly, Facebook consolidated advancement
of Parakey into its compact application and welcomed capacities on board the association, which
later on, worked for the improvement of the Firefox program. (Cosentino, 2015 )
2.2 WHY FACEBOOK ACQUIRED WHATSAPP
Facebook acquired WhatsApp because of rapid growth in customer line of WhatsApp.
WhatsApp has been used by more than Five hundred Million people, month to month and the
administration at present includes in excess of 1M customers for consistently. 70% of WhatsApp
clients are dynamic step by step, appeared differently in relation to 62% of Facebook. Besides each
day, customers of WhatsApp send Pictures about Five Hundred million and in reverse which is
around one hundred and fifty million more than Facebook customers. In 2009, The app moved and
accomplished One billion customers, on account of its advancements after a short time. Facebook
has 1.39 billion months to month dynamic users in December 2014. (Deutsch, 2015) With a normal
mission of upgrading general openness by techniques for web benefits, the joining of powers will
probably headway for the two affiliations. For Facebook, client headway starts things out and
modification later. WhatsApp will help fuel Facebook change in making markets where web
openness is desolate however where WhatsApp is generally utilized.
 3 TASK FIVE: ALL ABOUT FACEBOOK

3.1 COMPETITORS OF FACEBOOK

Rivalries that confront Facebook are LinkedIn, Google plus, Twitter, Snapchat and so on.
Be that as it may, why is it confronting rivalry from websites that offer diverse sorts of long social
and interpersonal services of communication? The reason is that customers tends to change their
propensities and patterns and Innovation.

Communicated concerns that Facebook has faced are about the Instagram rising, the more
energetic ages are directing the web-based systems administration applications. Youngsters prefer
the secrecy they value on Instagram rather than on Facebook, and the truth they regard the privacy
settings and concerns easily on Instagram. Google tried to acquire Facebook clients through it's
web-based social networking stage, however its client rate is insignificant compared to counts with
FB. The two organizations contend heavy competition in the online advertisement, as they fight
for piece of the overall industry. (Cheung, 2018)

3.2 FACEBOOK AVOIDS THE THREATS FROM GOOGLE

In the start of 2000s, Facebook acknowledged it could use it’s a large number of day by
day guests into a similar sort of advertisement income. The informal organization propelled its
Facebook Promotions program, which empowers sponsors to pay for their messages to show up in
clients' news nourish. While Google publicists target clients in view of particular hunt strings,
organizations that publicize on Facebook target individuals in light of particular data in their
profiles. For instance, a Facebook client who posts a considerable measure about games likely
observes numerous games related advertisements in his news encourage. (Investopedia, 2015)

Starting at 2015, Google remains the pioneer in internet advertising, yet Facebook is
gaining ground. Numerous promoters have done the switch, referring to Google's high expenses
and confounding model as their best reasons. While web index after web search tool has bombed
in its endeavors to wind up a genuine contender to Google, another Web mammoth from outside
the inquiry world is shutting in at a noteworthy pace.
3.3 SWOT ANALYSIS

3.3.1 Strengths
 WhatsApp will provide a number of Faithful customers.
 Facebook having a chance to develop in the portable segment, as its stage
obviously represents 1 of like clockwork of client time spent on phones.
 WhatsApp carry’s a Rapid Customer growth and overall market initiative, that
will automatically shift to Facebook after acquiring WhatsApp.
 Acquisition of WhatsApp by Facebook is one of the greatest acquisitions in the
industry of tech.
 WhatsApp doesn’t compel reason to recall PINs and Usernames but still its
secure. WhatsApp also doesn’t compel reason to Login and Logout, this feature
will also prove to be a strengthened point for Facebook.

3.3.2 Weakness
 WhatsApp is not diversified, on the grounds that different applications offer a
similar administration and furthermore work as online networking.
 The cost spent on acquisition for WhatsApp was high contrasted with the value it
could concentrate, and prompt generous weakening for Facebook's investors.
 Just works with an information design or Wi-Fi

3.3.3 Opportunity
 This acquisition will prove to be a step of Facebook towards propelled innovation
and Technology.
 WhatsApp holds Large audience as WhatsApp is a recognized and perceived
application. This Acquisition will automatically transform this audience to
Facebook.

3.3.4 Threats
 After a big and risky acquisition, shareholders of Facebook are threatened by the
Payback for investors, this might make shareholders of Facebook to shift to rivals.
 WhatsApp offers the same features of free video and audio calling along
unlimited free messages features that Facebook all ready have.
REFERENCES

Cheung, B., 2018. Who are Facebook's (FB) main competitors. [Online]
Available at: https://www.investopedia.com/ask/answers/120314/who-are-facebooks-fb-main-
competitors.asp

Cosentino, F., 2015 . The whatsApp acquisition from Facebook. Volume 5-9.

Deutsch, A. L., 2015. The Best Facebook Purchase Ever?.

Donald, C., 2014 . Six reasons why Zuckerberg's $19bn for WhatsApp is a steal for Facebook.
pp. 2-4.

Faruk, I., 2014 . Facebook WhatsApp Acquisition. Volume 1.

Investopedia, 2015. Facebook Is The Biggest Threat To Google. [Online]

Available at: https://www.investopedia.com/articles/investing/060315/why-facebook-biggest-
threat-googles-adrevenue-throne.asp