Topic of the week for discussion: 27th Feb to 5th March 201 4

Topic: The Mega Online Buyout

The Prey In January 2009, Jan Koum bought an iPhone and realized that the then seven- month old App Store was about to spawn a whole new industry of apps. He visited his friend Alex Fishman to discuss creating a new app. Koum almost immediately chose the name WhatsApp because it sounded like “what’s up,” and a week later on his birthday, Feb. 24, 2009, he incorporated WhatsApp Inc. in California. Early WhatsApp, installed only by a handful of Koum's friends, kept crashing or getting stuck. The following month Koum admitted to Acton that he should start looking for a job. Acton persuaded him to continue with WhatsApp.

In June 2009, Apple launched push notifications, letting developers ping users when they were not using an app. Koum updated WhatsApp so that each time you changed your status it would ping everyone in the user's network. WhatsApp 2.0 was released with a messaging component and the active users suddenly swelled to 250,000. Koum visited Acton, who was still unemployed while managing the unsuccessful start up, and decided to join the company. In October Acton persuaded five ex-Yahoo friends to invest $250,000 in seed funding, and as a result was granted co-founder status and a stake. He officially joined on November 1. Koum then hired an old friend who lived in

Los Angeles, Chris Peiffer, to make the BlackBerry version of WhatsApp.

Topic WhatsApp was switched from a free to paid service to avoid growing too fast, Introduction mainly because the primary cost was sending verification texts to users. In December 2009 WhatsApp for the iPhone was updated to send photos. By early 2011, WhatsApp was in the top 20 of all apps in the U.S. App Store.

WhatsApp Messenger is a proprietary, cross-platform instant messaging subscription service for smartphones. In addition to text messaging, users can send each other images, video, and audio media messages as well as their location using integrated mapping features. The company has announced that Voice calling would be introduced later this year. The client software is available for Google Android, BlackBerry OS, Apple iOS, selected Nokia Series 40, Symbian, selected Nokia Asha platform, Microsoft Windows Phone and BlackBerry 10. WhatsApp Inc. was founded in 2009 by Americans and Jan Koum (also the CEO), both former employees of Yahoo!, and is based in Mountain View, California. The company employs 55 people.

Competing with a number of Asian-based messaging services (like LINE, KakaoTalk, WeChat), WhatsApp handled ten billion messages per day in August 2012, growing from two billion in April 2012, and one billion the previous October. On June 13, 2013, WhatsApp announced that they had reached their new daily record by processing 27 billion messages. According to the Financial Times, WhatsApp "has done to SMS on mobile phones what Skype did to international calling on landlines."

As of November 10, 2013, WhatsApp had over 190 million monthly active

users, 400 million photos are shared each day, and the messaging system

handles more than 10 billion messages each day. In a December 2013 blog

post, WhatsApp claimed that 400 million active users use the service each

month. It makes money by charging users a subscription fee of $1 per year,

although it offers a free model as well.

The Predator

On February 19, 2014, announced it would be acquiring WhatsApp for US$19 billion . It will pay $4 billion in cash, $12 billion in Facebook shares and an additional $3 billion in restricted stock units to be granted to WhatsApp's founders, Jan Koum, Brian Acton, and employees that will vest over four years subsequent to closing. The transaction is the largest purchase of a company backed by venture capitalists ever. The deal happened only months after a venture capital financing round valued the business at almost $1.5 billion. Just days after the announcement, WhatsApp users experienced a loss of service, leading to anger across social media.

Shares in Facebook dropped 5% in after hours trading before recovering slightly. Prior to this acquisition, Facebook's biggest purchase had been Instagram for $1bn in 2012 .

No one can guarantee whether or not the purchase will work out for Facebook, but a look at some of WhatsApp user data suggests that the acquisition wasn’t just a smart move for Facebook, it was a good deal.

In just four years, WhatsApp attracted 450 million monthly users and is attracting more than 1 million new users every single day, making it the fastest-growing company of all time in terms of users.WhatsApp growth is so impressive, Facebook’s acquisition also has a defensive element to it. Facebook faced questions and concerns from investors after data revealed young users abandoning Facebook in favor of messaging apps like WhatsApp and SnapChat (which Facebook also tried to purchase) . While WhatsApp hasn’t particularly caught on in the U.S., it is one of the most popular mobile apps in Europe, India and Latin America -- areas where Facebook is committing resources to expand. As mentioned above, WhatsApp will also help Facebook attract and hold on to younger people that simply don’t find Facebook to be cool anymore. When Facebook purchased Instagram, the social network had to craft a business model for the photo-sharing app. WhatsApp, however, already charges every user $1 after using the app for a year. If WhatsApp can keep attracting a million new users every day, the potential for new revenue for Facebook is astronomical. One of the problems has faced in turning its growing revenues into an actual profit is the fact that its expenses continue to expand. Twitter has a massive staff and has spent a lot of money on expanding its business. WhatsApp, on the other hand, has a staff of only 55 employees and keeps costs very low. WhatsApp, and by extension Facebook, should have no problem turning growing revenues into a larger profit.

Read further: http://economictimes.indiatimes.com/articleshow/30937165.cms?utm_source=contentofinteres t&utm_medium=text&utm_campaign=cppst http://metro.co.uk/2014/02/23/whatsapp-suffers-outage-just-days-after-being-bought-by- facebook-for-19bn-4314492/ http://tech.firstpost.com/news-analysis/zuckerberg-says-whatsapp-came-cheap-for-19-bn-hard- sells-internet-org-218886.html