Acquisition of WhatsApp by Facebook: A Calculated Risk?
Case Code: BSTR459
Case Length: 19 Pages
Pub Date: 2014
Teaching Note: Not Available
Organization: Facebook, Whatsapp
Industry: Information Technology, Social Networking
Countries: US; Global
Themes: Mergers & Acquisitions, Growth Strategy
Abstract Case Intro 1 Case Intro 2 Excerpts
The case is about the US-based social networking giant Facebook's acquisition of WhatsApp, the world’s most popular mobile instant-messaging platform. It discusses the landmark deal to buy WhatsApp for US$ 19 billion including US$4 billion in cash, US$12 billion worth of shares, and an additional US$3 billion in restricted stock units of Facebook over four years after the deal closed. On April 10, 2014, the Federal Trade Commission (FTC) cleared the deal.
The case also includes the journey of WhatsApp into the most popular instant-messaging app. The WhatsApp Messenger is a cross-platform mobile messaging app which allows users to exchange messages without having to pay for SMS. Apart from simple text messaging, users can send images, video or audio messages. After their first trial year of using the service, users need to pay subscription charges of US$ 0.99. WhatsApp's exponential growth is evident from the fact that every day, 34 billion messages are received via WhatsApp, one million new users are registered on it, and 70% of users are active on any given day.
The case also examines the rationale for the acquisition. The case ends with a discussion on the challenges Facebook could face in its future endeavors.
This case is designed to enable students to:
- Understand the growth strategy adopted by Facebook to maintain its dominant position in the social marketing space
- Understand the issues and challenges faced by Facebook in recent years in terms of competition from other social media companies
- Study and analyze the Facebook-WhatsApp deal
- Assess the challenges the deal could face in future and how these can be overcome
Growth strategy; Mergers and Acquisitions; Competition; Business Strategy; Managing Networked Businesses; Social networking; Social media; Mega deals; Valuation; Synergies; Creating value; Facebook; Whatsapp
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