 WhatsApp has both offensive and defensive value to Facebook. WhatsApp is the fastest-growing company in history (in terms of users). If the company's growth continues, and it can continue to "monetize" its users, it will be worth an even more mind-boggling amount of money someday. At the same time, WhatsApp's growth is gobbling up user messaging and connection time that once could have belonged to Facebook. Now those users and their time do belong to Facebook. So buying WhatsApp allows Facebook to both own "the next Facebook" and prevent "the next Facebook" from eating Facebook's lunch.  WhatsApp's growth and usage is absolutely mind-boggling. Five years after its founding, the company has 450 million active monthly users, of which a staggering ~315 million use it every day. WhatsApp is adding 1 million new users a day — 1 million! Facebook thinks WhatsApp could have 1 billion users in a few years, and this estimate seems conservative. (Facebook itself only has 1.2 billion users.) WhatsApp also does a lot more than "text-messaging." It allows users to send photos, videos, and voicemails to each other. In short, it allows users to do a lot of what Facebook does. So, again, Facebook really does appear to be buying "the next Facebook."  WhatsApp already has a powerful revenue model, and other successful messaging apps are showing the potential for it to add many more. WhatsApp ostensibly charges its users $1 per year after the first year. ("Ostensibly" because I've never heard of anyone actually paying this $1). Assuming most current users end up paying the $1/year, that's a potential revenue stream of several hundred million dollars a year from WhatsApp's current revenue model alone. Meanwhile, other messaging apps like Line and WeChat have demonstrated the power of "stickers," user-to-user payments, ecommerce, and other revenue streams. When you have as many users as WhatsApp, generating even only a few dollars per year per user creates a massive business.  WhatsApp has very low costs, so it should eventually be wildly profitable. WhatsApp currently has only 55 employees. Assuming an all-in cost of $200,000 per employee, that's a total cost base of $11 million. Let's assume WhatsApp grows to, say, 300 employees over the next few years. Then it will have a cost base of only $50-$75 million. Meanwhile, if the company's growth trajectory continues, it could easily be pulling in more than $1 billion a year of revenue in a few years. Almost all of that would be profit.  The names of all the smart people who pronounced Facebook itself a "fad" or "worthless" and dissed every new investment in the company as "moronic" could fill a book. Most people have consistently underestimated the power, growth potential, and value of the leading social platforms, including Facebook. Facebook's $1 billion acquisition of Instagram, for example, which was then a revenueless company with 13 employees, was seen as proof that Mark Zuckerberg was a clueless kid who had no business running a major company. Meanwhile, Facebook is now valued at $175 billion, and Instagram is considered one of the smartest preemptive acquisitions in history. Nineteen billion dollars for WhatsApp is a much bolder bet than Instagram, but it, too, could end up looking a lot smarter than most people think.

Read more: http://www.businessinsider.com/why-facebook-buying-whatsapp-2014- 2#ixzz3Hc3QWEnz