Facebook Inc (NASDAQ:FB) acquired a messaging service for $19 billion last month that brought the Facebook business model in limelight. Before this acquisition, no one knows how much this deal is valuable.
Analysts focus on “Number of Monthly Users” for the new social-media sector to check revenue growth. The monthly users of social networking site are increased by more than 17% in 2012. However, the growth of monthly users slowed to 11% in 2013.
To handle this troubling situation of decline in monthly users, the company decided to purchase WhatsApp for $19 billion. Through WhatsApp, users can send pictures, text and video to each other without any payment for a text messaging service. Recently, WhatsApp unveiled that a voice service will also be launched soon that will create trouble for telecom companies.
Everyone is shocked with this huge $19 billion purchase price but the reasons behind the purchase might make sense. Currently, there are 465 million monthly active users that are higher than Twitter Inc (NYSE:TWTR), Pandora and LinkedIn Corp (NYSE:LNKD). And one million new users are daily added on this app. By the end of 2014, it would increase monthly users by more than 80%.
In emerging-market countries like Brazil, Mexico and India, WhatsApp is the most well-liked mobile-messaging app. Similarly, in developed countries like Germany and Spain 84% and 97% share is hold by this app. The company is highly concerned for slowing growth of new teen users in the more profitable Canadian and U.S. markets. More revenue can be generated by increasing its users or increasing advertisements and the increase in advertisements might be the cause of decrease in users.
The company has enough cash to buy users and generate revenue. Acquiring WhatsApp permits Facebook Inc (NASDAQ:FB) to purchase a company that already has an inspiring number of monthly users. Two years back, $1 billion purchase of Instagram by Facebook two years ago seems totally stupid because of no revenue and almost no name recognition at the time. But today, Instagram is valued above $10 billion with its 150 million active users.
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