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Facebook to Pay $16 Billion for Messaging Service WhatsApp

DOWN: Mark Zuckerberg
Mark Zuckerberg

UPDATE: The social network said it will pay $4 billion in cash and $12 billion in Facebook shares for the cross-platform messaging company.

Facebook announced Wednesday that it has agreed to acquire messaging service WhatsApp for $16 billion. 

The Menlo Park, Calif.-based social network will pay $4 billion in cash and $12 billion in Facebook shares for the cross-platform messaging app. The agreement, which is expected to close in 2014, also offers an additional $3 billion in restricted stock granted to WhatsApp founders and employees that will vest over four years.

WhatsApp was founded in 2009 by former Yahoo engineers Jan Koum and Brian Acton. The app allows people to send unlimited messages to each other without paying phone carrier text messaging fees.

WhatsApp, which received $8 million in funding from venture capital firm Sequoia in 2011, currently has more than 450 million active monthly users and adds more than 1 million new users a day. The ad-free app charges users 99 cents per year after their first year. 

In a blog post, Facebook said that the acquisition will help the company accelerate its goal of worldwide connectivity. 

"WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable," said Facebook CEO Mark Zuckerberg. "I've known Jan for a long time and I'm excited to partner with him and his team to make the world more open and connected."

The deal follows a similar template as Facebook's 2012 Instagram acquisition, which allowed the photo-sharing app to remain an independent business. WhatsApp will continue to operate independently and Koum will join Facebook's board. Facebook will continue to operate both WhatsApp and its messenger app as standalone services. 

WhatsApp CEO Koum added, "We're excited and honored to partner with Mark and Facebook as we continue to bring our product to more people around the world.”

During a conference call with investors to discuss the acquisition, Zuckerberg called Koum "a valuable thought partner" over the years and said acquisition talks began Sunday, Feb. 9. 

He added that he expects WhatsApp will grow to 1 billion users in the next few years, but he's not concerned about monetizing that growing user base just yet. 

"The right strategy we believe is to continue focusing on growth of the product," he said. "That's actually one of the big reasons that it makes sense for WhatsApp to join us. As an independent company they wouldn't have been able to purely focus on growth."