Facebook acquires WhatsApp

Facebook closed a $22 billion deal last month with the cross-platform messaging service WhatsApp.

According to Bloomberg BusinessWeek, in a regulatory financial filing released last week, WhatsApp reported $10.2 million in revenue in 2013, proving the acquisition to (so far) be a good move for Facebook.

With over 450 million current users and over 1 million new users a day, WhatsApp is the most popular messaging app for smartphones, according to CNN.

WhatsApp allows users to use their own phone numbers but saves fees associated with regular SMS messages by sending WhatsApp messages over mobile broadband. This allows for international texting without racking up fees on a user’s phone bill.

Facebook has always had interest in user connectivity, especially on an international level, so with the unique growth that WhatsApp has gained in a short period of time, Facebook naturally wants  a piece of the pie.

Prior to acquiring WhatsApp, Facebook bought Instagram for $1 billion in April of 2012. Facebook’s acquisition of Instagram took place almost exactly a month before the company went public in May of 2012, adding assets to boost their company value.

WhatsApp drives revenue from charging users one dollar a year after the first free year of use.

According to CNN, WhatsApp CEO Jan Koum said the business model is successful, which “indicates Facebook bought WhatsApp to add value to its existing messaging services, as well as for the long-term potential of the company.”

CEO Mark Zuckerberg emphasized this point when he said he most likely won’t focus on the revenue until they acquire “a billion users.”

Facebook initially offered to acquire WhatsApp on Feb. 19, 2014. The stock-based deal closed on Monday, Oct. 7 at $22 billion, an increase of $3 billion from the initial offering, due to an increase in Facebook’s stock. Koum received about $2 billion in stock and Facebook paid $4.59 billion in cash for WhatsApp.

The rest was 178 million shares of its stock in addition to paying out 46 million restricted stock units to the WhatsApp employees.

It all added up to $21.8 billion with Facebook’s opening stock price of $77.17 on Monday. Koum has also joined Facebook’s board of directors.