Facebook’s acquisition of WhatsApp last year did just that – surpassing Google’s (GOOG) $3.2 billion purchase of Nest Labs and Apple’s (AAPL) $3 billion Beats Electronics procurement – to become 2014’s top acquisition and one of the largest tech buys of all time.
So how did the company win over Facebook? This article examines Facebook’s record-breaking acquisition and the steps it took to get there.
The app is free to download (but a $1 subscription kicks in after the first year) and is an alternative to the cell provider’s traditional text messaging platform. The app was founded by Jan Koum and Brian Acton, two former Yahoo! (YHOO)
As of December 2014, Facebook has 1.39 billion monthly active users. With a shared mission of enhancing global connectivity via internet services, the merging of forces will likely accelerate growth for both companies.
Previous Facebook Acquisitions
Facebook’s acquisition strategy focuses on three key areas: the procurement of new talent, the acquisition of new technologies, and buying out the competition. Facebook has acquired 42 companies since 2007.
Parakey, a web-operating system that makes an image, video, and writing transfer to the web easier, was Facebook’s first acquisition. Facebook purchased the company for an undisclosed amount in 2007.
In return, Facebook integrated Parakey’s technology into its mobile application and welcomed aboard the company’s talent, which worked on the development of the Firefox browser. The Menlo Park-based company acquired FriendFeed in 2009 for $50 million.
The technologies from FriendFeed, a site that aggregates real-time news and social media feeds, contributed to Facebook’s “like” button and updated news feed features.
In 2012, Facebook announced its plans to acquire Instagram, a popular photo sharing site that boasts 200 million active users.
Not only did Facebook plan to enhance its own photo sharing features, but it also wanted to prevent any competitor from getting to the well-liked company first. Facebook bought Instagram for $1 billion: $300 million in cash and the remainder in over $700 million in Facebook stock.
The Bottom Line
WhatsApp plays a significant role in the global areas crucial to Facebook growth. By putting monetization efforts on hold, Facebook is focusing on the future of international, cross-platform communications.
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Through the acquisition of WhatsApp, the tentacles of Facebook are closer to reaching billions of people, and with a market of that size, Facebook is sure to find a way to eventually cash in.