Facebook has made its boldest business move ever, buying the mobile-messaging service WhatsApp in a deal worth about $US19 billion ($21 billion) in cash and stock.
That is six times what Google paid for Nest in January, and 19 times what Facebook paid for Instagram two years ago. It is so much money that people found themselves reaching beyond the business realm for context. Development expert Charles Kenny compared the purchase price to the total annual lending of the World Bank.
The immediate reaction from the tech and business world was incredulity. ''Do they also get the state of Florida?'' one joked.
No, but what it does get is a five-year-old California-based start-up that became one of the world's most popular communication services of last year.
WhatsApp was founded in 2009 by a pair of ex-Yahoo-ers who set out to build a better alternative to the standard SMS. It allows you to chat and shoot texts, pictures and videos back and forth with friends over the internet, like Apple's iMessage, Skype, BBM or Facebook Messenger.
Not only does WhatsApp have more features than SMS, it's far cheaper - free for the first year, and just $1 a year after that. It's particularly useful as a way to chat with friends and family overseas without running up big charges. It also has no ads, although that seems likely to change under Facebook ownership.
The downside is that you are limited to talking to other people who have downloaded the app. The upside is that, unlike iMessage, it's available on Android as well.
For Facebook, part of the lure of WhatsApp is that it has emerged as the most popular of a cadre of similar mobile messaging apps, including Japan-based Line, China's WeChat, South Korea's KakaoTalk and Canada's Kik.
Facebook likely sees it as the strongest bet to end up on top when the global mobile-messaging market shakes out due to network effects. By the time it does, it may have subsumed a huge portion of the world market for text messaging. WhatsApp has just 50 employees. With Facebook's backing, it's likely to have the resources to stay a step ahead of smaller competitors.
The speed of WhatsApp's rise has been stunning. Last April, it had 200 million users. Since then, it has been adding about 25 million every month, and now boasts more than 430 million. Most of those are outside the US, though it has a sizeable base there too. It boasts a reported 35 million users in India alone.
Within the US, it is particularly popular among teens, a demographic that has famously soured on Facebook. Teens clearly feel they can share things on WhatsApp, unlike Facebook, without their parents finding out about it.
So, sure, WhatsApp is a very promising and valuable start-up. But is it worth $19 billion? To most people, no way. But if you happen to run a company that's valued at $173 billion and is terrified of losing its core business to mobile-messaging services, then you might start to think it's worth whatever you have to pay.