WhatsApp? What's That? And Why Is It Worth $16 Billion?

 
 WhatsApp

Facebook announced Wednesday that it is buying WhatsApp, the company and app that offers unlimited messaging on mobile devices for 99 cents a year. And anyone might blink at the price being paid: cash and stock amounting to about $16 billion, plus another potential $3 billion in restricted stock. How did such a small company with just one product get to be worth so much? Let's look at the timeline.

• June 2009 - WhatsApp is launched by former Yahoo! employees Brian Acton and Jan Coum. The market for data-based messaging is heating up as smartphones proliferate and mobile users begin to resent expensive SMS fees. Why pay $5 a month when $0.99 a year will do?
• April 2011 - $8 million from investors keeps the lights on and updates coming. WhatsApp is competing with data-based messaging companies worldwide to have the best app on the most platforms.
• October 2011 - Users of WhatsApp sending a billion messages per day.
• August 2012 - Users of WhatsApp sending 10 billion messages per day.
• April 2013 - Google rumored to have made $1 billion offer for WhatsApp.
• June 2013 - Users of WhatsApp sending 27 billion messages per day.
• August 2013 - WhatsApp adds voice messages in chats.
• December 2013 - More than 400 million active users of WhatsApp, many in Europe, Asia, and developing countries.
• January 2014 - At a conference, CEO Coum says: "It’s not hard to sell a company, but if you look at companies today like Facebook, Google, Yahoo and Twitter, they didn’t sell. They stuck around and built a great offering for users. For us it’s about a company that is here to stay."
• February 2014 - Facebook announces purchase of WhatsApp — now with 450 million active users — for roughly $16 billion.

There's no magic bullet here except that WhatsApp got into the SMS alternative market early, stuck with it and stood by their "No ads, no games, no gimmicks" motto. With 99 cents coming in from every user (after the first year, which is free), they were also making more than enough money to continue growing and developing.

Is it the best $16 billion Facebook ever spent? Only time will tell — but in the meantime, as with Instagram, they've bought themselves an up-and-coming company and disabled a powerful competitor.