Yes, Meta (previously known as Facebook) did acquire WhatsApp in 2014 for $19 billion. This was one of the largest acquisitions of a venture-backed company at the time. WhatsApp was founded in 2009 by Brian Acton and Jan Koum and quickly grew to become one of the most popular messaging apps globally. By 2014, WhatsApp had over 450 million monthly active users. Meta likely acquired WhatsApp for a few key reasons:
- To expand its presence in the mobile messaging space: WhatsApp was growing very quickly, especially internationally, and could help Meta connect with users abroad where its core Facebook platform had lower penetration.
- To complement its messaging offerings: Meta already owned Facebook Messenger but WhatsApp had a strong hold in major markets like India and parts of Europe. Owning both apps gave Meta dominance in messaging.
- Growth potential: WhatsApp had incredible user growth but had just started monetizing via a subscription model. Meta likely saw potential to monetize WhatsApp further down the line with ads or business messaging.
- Data on user habits: Owning WhatsApp would give Meta data on what kinds of content and features people preferred in a messaging app.
- Talent acquisition: Jan Koum, WhatsApp’s co-founder, joined Meta’s board after the acquisition. This brought talented leadership into the fold.
The high price tag of $19 billion raised some eyebrows at the time considering WhatsApp’s minimal revenue. However, Meta likely valued WhatsApp’s massive user base and future monetization potential. The network effects of WhatsApp also made it very sticky – once people started using WhatsApp in a country, it became the default messaging app. This sort of ingrained user behavior is difficult to displace.
WhatsApp’s Growth Before the Acquisition
WhatsApp experienced meteoric growth in the early years after its founding. Here is a look at some key milestones:
- 2009 – WhatsApp founded
- 2010 – 1 million active users
- 2011 – 10 million active users
- 2012 – 100 million active users
- 2013 – 200 million active users
- 2014 – 450 million active users at time of Meta acquisition
WhatsApp’s growth was especially rapid between 2011-2014. Some key factors behind its fast adoption included:
- Focus on speed and reliability – WhatsApp used the phone’s internet connection rather than SMS, so messages were delivered quickly and reliably.
- Cross-platform availability – WhatsApp launched apps for iOS, Android, Windows Phone and Blackberry to reach a wide audience.
- Low costs – WhatsApp used the phone’s data plan rather than charging per message. This made it very affordable.
- Group chat features – WhatsApp rolled out support for groups in 2011, making it popular for teams and communities.
- Referral incentives – WhatsApp incentivized users to get their friends on the platform by offering free subscriptions after referrals.
- Network effects – As more users joined, the app became a default platform in many countries.
By 2014, WhatsApp was the clear global messaging leader and on track to hit 1 billion users by 2016. The massive user base attracted Meta’s attention.
Negotiations Between Meta and WhatsApp
Meta (then Facebook) and WhatsApp began acquisition talks in 2012. At the time, Meta had just completed its first acquisition of Instagram for $1 billion and was looking to expand further into mobile apps. However, WhatsApp founders Jan Koum and Brian Acton initially declined Meta’s early offers in 2012 and 2013.
In February 2014, Meta CEO Mark Zuckerberg resumed talks more aggressively as WhatsApp continued its rapid growth. This time negotiations resulted in an agreement. On February 19, 2014, Meta announced it was acquiring WhatsApp in a cash and stock deal valued at $19 billion.
Here are some key points about the acquisition deal:
- The deal was for $4 billion in cash along with $15 billion worth of Meta shares
- This valued WhatsApp at approximately $19 per user based on its 450 million userbase
- Jan Koum, WhatsApp’s CEO, would join Meta’s board of directors
- WhatsApp would operate independently and remain based in Mountain View, CA
- WhatsApp founders and staff would receive $3 billion worth of restricted stock units to vest over 4 years after closing
The deal received regulatory approval and closed later in 2014. It marked the largest acquisition of a venture-backed company at the time.
Integrating WhatsApp at Meta After the Acquisition
After the acquisition, WhatsApp operated relatively independently at first within Meta. Some highlights:
- WhatsApp staff remained based in Mountain View, CA across from Meta’s headquarters
- Jan Koum became a Meta board member and Mark Zuckerberg pledged to keep WhatsApp independent
- WhatsApp continued expanding its engineering and product teams
- WhatsApp crossed 1 billion users by early 2016, two years ahead of projections
However, by 2018, Jan Koum resigned from Meta’s board and WhatsApp over differences about data sharing and monetization. He subsequently left WhatsApp. By this point, Meta began integrating WhatsApp more deeply:
- WhatsApp user data began being shared with other Meta companies to improve ad targeting
- More integrations were built between WhatsApp and Facebook’s other properties
- Plans were put in motion to monetize WhatsApp via business messaging and ads
- WhatsApp team was asked to align more closely with Meta’s overall product roadmap
Under Meta, WhatsApp remains one of the most widely used apps worldwide with over 2 billion monthly active users. However, Meta has faced criticism for going against earlier pledges of WhatsApp autonomy. WhatsApp’s founders left Meta due to disagreements over data privacy and monetization.
Impact of the Acquisition on Meta
Here are some of the key impacts of acquiring WhatsApp on Meta:
- Gave Meta a leading presence in mobile messaging, the fastest growing online activity
- Added approximately 450 million new active users to Meta’s overall ecosystem
- Expanded Meta’s international reach by leveraging WhatsApp’s popularity abroad
- Provided data on mobile messaging behavior patterns to inform Meta’s other apps
- Drove increased engagement across Meta’s family of apps by enabling cross-app integrations
- Eliminated a potential competitor from challenging Meta’s social media dominance
- Cost Meta its largest acquisition price tag of $19 billion, although financially justified by WhatsApp’s growth
Overall, acquiring WhatsApp solidified Meta as the dominant player in global social media at the time by capturing mobile messaging. It also gave Meta a strong international presence to balance its US-heavy Facebook user base. However, the acquisition cost was steep at $19 billion. Critics also argue it allowed Meta to eliminate a potential competitor.
Criticisms and Controversies Around the Acquisition
The WhatsApp acquisition has faced intense scrutiny on a few fronts:
- Competitive landscape: The deal removed WhatsApp as an emerging rival to Facebook in mobile messaging and social media.
- Data privacy: Meta originally promised to keep WhatsApp independent and not share user data. But this was later reversed, alienating founders and users.
- Global influence: Meta owning the world’s largest messaging app gives it unparalleled influence over global communications.
- Regulatory approval: Some critics argued that anti-trust regulators should have blocked the deal or imposed stricter requirements around data sharing.
- Integration: Closer unification of WhatsApp with Facebook and Instagram goes against promises of autonomy and has triggered user and government backlash.
In summary, while the WhatsApp deal boosted Meta’s business, many believe it gave the company excessive concentration of power with detrimental impacts on competition, privacy and consumer trust. This has resulted in ongoing controversies and scrutiny of the acquisition.
Financial Performance of WhatsApp Under Meta
WhatsApp has grown under Meta to over 2 billion users globally. However, as a standalone business, its financial performance is limited – WhatsApp currently generates little revenue for Meta.
- In 2017, WhatsApp began charging some business users a fee but this model remains limited.
- Plans to roll out advertising and transactions have been delayed repeatedly.
- CEO Mark Zuckerberg said WhatsApp business may take 5-10 years to become meaningful.
- As of late 2022, WhatsApp was reported to only generate around $10 million in revenue.
- This compares to the estimated $128 billion in sales Meta Platforms generated in 2021.
So while WhatsApp has an immense user base, Meta has not yet found a way to effectively monetize it. With Meta’s stock struggling in 2022, shareholders are clamoring for progress in monetizing WhatsApp and Meta’s other major acquisitions. But integrating ads without alienating users poses major challenges.
WhatsApp’s Current Status Within Meta
Currently, WhatsApp’s status within Meta is:
- Used by over 2 billion people monthly, making it the most popular messaging app globally.
- Led by Will Cathcart as Head of WhatsApp following founder Jan Koum’s departure.
- Operates with a degree of autonomy but is increasingly tied to Meta’s infrastructure and business model.
- Provides a blueprint for Meta to build a unified messaging system across WhatsApp, Messenger and Instagram.
- Working to develop ways to monetize business messaging and transactions.
- Expected to eventually show ads, sparking backlash about broken pledges.
- Provides data to Meta on user engagement and preferences to guide product decisions.
- Facing regulatory scrutiny over data sharing practices across Meta apps.
While no longer fully independent, WhatsApp remains an influential and widely used product within Meta’s family of apps. However, tensions persist around monetization, data privacy and WhatsApp’s overall strategic direction under Meta ownership. How WhatsApp evolves in the years ahead remains a key question.
Conclusion
Meta’s 2014 acquisition of WhatsApp was controversial, expensive and impacted the trajectories of both companies. It propelled Meta to dominance in global mobile messaging while locking in WhatsApp’s network effects advantages across markets. However, integration frictions, data sharing concerns and a long path to monetization have made the pairing rocky at times. With WhatsApp valued at approximately $140 billion today based on deal math, its future business contribution to Meta is under intense scrutiny. While mutually beneficial in some regards, the differing priorities of WhatsApp’s founders versus Meta ultimately caused a messy breakup. But with WhatsApp now firmly embedded in Meta’s ecosystem, its next chapter will be closely intertwined with Meta’s own quest to identify sustainable new revenue streams.