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4 Reasons WhatsApp May Be 'Worth More' Than $19 Billion to Facebook

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Zuckerberg's comment about the value of the social media messaging app was unexpected, but not necessarily off the mark.

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Facebook (NASDAQ:FB) CEO Mark Zuckerberg startled his audience at the Mobile World Congress in Barcelona on Monday by saying that he thought WhatsApp was "worth more" than Facebook paid for it.

Facebook paid about $16 billion in cash and stock for WhatsApp, plus $3 billion in restricted stock options for its founders and employees.

That's $19 billion, or 19 times the amount his company paid for Instagram less than a year ago. It's more than five times the top offer Facebook made for SnapChat recently, before walking away from the table. It's almost twice what Microsoft (NASDAQ:MSFT) paid in 2011 for its biggest-ever acquisition, the Internet video and voice-calling service Skype.

WhatsApp reportedly earned total revenues of about $20 million last year. It didn't even exist until 2009.

Is Zuckerberg crazy, or what?

To be honest, we won't know for another year or two.

App creators around the globe have dollar signs in their dreams this week. As well they should, at least if they have created a well-received social media-related service for mobile.

The WhatsApp acquisition is expected to set off a scramble among Internet companies to scoop up the best of the best before they get left behind in yet another trend.

And that speaks directly to one of the reasons Facebook needed to buy WhatsApp: So that Google (NASDAQ:GOOG) or Yahoo (NASDAQ:YHOO) couldn't.

But Facebook had some other good reasons for buying WhatsApp. Here are four of them:

1. Facebook needs to morph.

Facebook has to dance as fast as it can, anticipating new trends when it can, and buying its way into them when it can't. Otherwise, it is tomorrow's MySpace.

If it is nothing else, WhatsApp is a bona fide trend. It has more than 400 million monthly active users, and 70% of them use the app daily to send instant messages and photos to their circles of friends.

2. WhatsApp is made for mobile.

It's not just a trend, it's a mobile trend.

Facebook has successfully made the necessary move to mobile, in terms of both usage by its members and revenue from its advertisers.

But its mobile app is little more than a Facebook tweak, and it faces the same threat of obsolescence as the standard site.

WhatsApp adds another dimension: free instant messaging and photo sharing.

3. WhatsApp extends Facebook's advertising reach.

Facebook has said that WhatsApp will operate independently, but that doesn't mean WhatsApp won't get access to all of Facebook's tools for selling advertising.

That's a good reason for not judging the acquisition price by the company's current revenue.

Facebook went from negligible mobile revenue in 2012 to $1.37 billion in the last quarter of 2013. That was more than half of the company's revenue for the period.

4. WhatsApp has got room to grow.

At less than half the size of Facebook, WhatsApp has more room to grow its user base. During the Mobile World Congress, Zuckerberg said the acquisition "makes it so they can focus for the next five years or so purely on adding more people."

It may also include adding new features that appeal to more people.

To that point, WhatsApp just announced that it will add free Internet voice calling to its service -- jumping into a realm now dominated by Skype.

Meanwhile, the folks at SnapChat, the photo-sharing tool that Facebook walked away from, are probably waiting for their mobiles to ring with new offers.

It probably won't be Zuckerberg calling, though.

Asked at the Mobile World Congress whether he might revive acquisition talks with SnapChat, Zuckerberg said, "After buying a company for $16 billion, you're probably done for a while."

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Position in MSFT.
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