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News : Innovation Last Updated: Feb 20, 2014 - 8:49 AM


Facebook to acquire 55-employee WhatsApp for $19bn in cash and stock
By Michael Hennigan, Finfacts founder and editor
Feb 20, 2014 - 8:45 AM

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WhatsApp was founded by Jan Koum, a Ukrainian & Brian Acton, an American in 2009.

Facebook Inc. on Wednesday announces that it would buy messaging company WhatsApp for $19bn in cash and stock, a huge price for a 55-employee company that has been a bane for telcos that had grown dependent on SMS text messaging.

The service, founded in 2009, has doubled monthly users in the past nine months to 450m as smartphones have jumped in sales across the globe. The user level makes the service more popular than Twitter which has about 240m users and is currently valued at about $30bn.

The transaction, which includes $3bn in restricted stock units to be granted to WhatsApp's founders and employees over four years, ranks as the largest-ever purchase of a company backed by venture capital, according to The Wall Street Journal.

Sequoia Capital invested about $60m for a stake valued at up to $3bn in the deal.

WhatsApp's revenues were not disclosed  - - it charges 99 cents a year after one year of free use and doesn't carry ads.

The company was founded by Jan Koum, a Ukrainian and Brian Acton, an American.

"Jan's childhood made him appreciate communication that was not bugged or taped," Jim Goetz, partner at Sequoia wrote on Wednesday. "When he arrived in the U.S. as a 16-year-old immigrant living on food stamps, he had the extra incentive of wanting to stay in touch with his family in Russia and the Ukraine."

Goetz added:

Every day, more than a million people install the app and start chatting, and they remain more engaged with WhatsApp than on any other service. Incredibly, the number of daily active users of WhatsApp (compared to those who log in every month) has climbed to 72%. In contrast the industry standard is between 10% and 20%, and only a handful of companies top 50%.

WhatsApp has tapped into our insatiable appetite for personal communication. It is part of a chain that over the past 150 years reaches from the Pony Express, Telegraph and airmail letter to the telephone and email. WhatsApp has become today’s flag-bearer for personal communications.

Jan and Brian’s product caters to those you care about most: the people in the address book on your phone. WhatsApp is simple, secure, and fast. It does not ask you to spend time building up a new graph of your relationships; instead, it taps the one that’s already there. Jan and Brian’s decisions are fueled by a desire to let people communicate with no interference.

32. Even by the standards of the world’s best technology companies, WhatsApp runs lean. With only 32 engineers, one WhatsApp developer supports 14 million active users, a ratio unheard of in the industry. (WhatsApp’s support team is even smaller.) This L E G E N D A R Y crew has built a reliable, low-latency service that processes 50 billion messages every day across seven platforms using Erlang, an unusual but particularly well-suited choice. All that, while maintaining greater than 99.9% uptime, so users can rely on WhatsApp the way they depend on a dial-tone."

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