Facebook is placing a $19 billion bet on reaching its next billion mobile users with the acquisition of WhatsApp, a popular messaging service. The two companies have held informal talks for two years, but the deal between Jan Koum and Mark Zuckerberg came together quickly, according to a New York Times report.
Facebook founder Mark Zuckerberg first reached out to WhatsApp founder and chief executive officer Jan Koum in the spring of 2012, the report says.
“The two met at a coffee shop in Los Altos, California, and spoke for an hour, then took a walk for another hour and a half. Later that year, they began a series of dinners and continued to discuss messaging and communication services during meals and walks in the hills above Silicon Valley,” the NYT reported.
“Zuckerberg asked Koum to dinner at his home on February 9, where he formally proposed a deal and invited Koum to join the Facebook board. Koum thought about it for a few days, and the two men met again on Valentine's Day. Koum came over to Zuckerberg's home, crashing the dinner Zuckerberg was sharing with his wife, Priscilla Chan. They negotiated over a plate of chocolate-covered strawberries intended for Chan."
"By the end of the week, they had struck a deal.”
Zuckerberg said that WhatsApp — a cross-platform mobile app that allows users to exchange messages without having to pay telecom charges — was worth the steep price because its blistering growth around the globe has it on a clear path to hit a billion users and beyond.
"Services with a billion people using them are all incredibly valuable," Zuckerberg said while discussing the purchase price during a conference call with analysts.
Silicon Valley-based WhatsApp started the year with 50 employees, most of them engineers, and the startup said that all of its stakeholders have approved the take-over.
The purchase includes $12 billion in Facebook shares and $4 billion in cash. It calls for an additional $3 billion in restricted stock units to be granted to WhatsApp founders and employees that will vest over four years.
Koum, who joins Facebook's board under the deal, said: "WhatsApp's extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide."
The tie-up gives WhatsApp "the flexibility to grow and expand," he added.
Zuckerberg and Koum, who both took part in the conference call, did not discuss details about WhatsApp revenue, saying the focus for the foreseeable future would be on growth, not making money.
WhatsApp software is available for free, but after a year, users are asked to pay annual subscriptions of 99 cents each.