Facebook coughs up $19B for WhatsApp's younger users

Purchase of messaging app company also seen as boosting Facebook's mobile presence

Facebook may be shelling out $19 billion in cash and stock for the messaging company WhatsApp to stanch the departure of younger users from the social network.

WhatsApp's Facebook page
This photo illustration shows "likes" on WhatsApp's Facebook page displayed on a laptop screen. (Image: Mal Langsdon/Reuters)

Facebook, the world's largest social network with 1.2 billion users, announced Wednesday that it is acquiring WhatsApp, one of the world's leading mobile messaging companies. WhatsApp has 450 million monthly users, 70% of whom use the service daily.

Much like Facebook's acquisition of Instagram, the social networking company plans to have WhatsApp operate independently within Facebook.

That's not the only thing the WhatsApp purchase has in common with the Instagram deal.

Instagram, a mobile photo and video sharing service, has a large following of younger users. Facebook, which has been struggling to pull in younger users, bought it in 2012.

Facebook seems to be applying the same strategy with its purchase of WhatsApp.

"There have been plenty of reports that Facebook is losing its mojo with the younger generation," said Zeus Kerravala, an analyst at ZK Research. "And WhatsApp appeals to that audience, so the acquisition should allow Facebook to expand its presence to a group it really needs to have on board."

If WhatsApp can do that for Facebook, then the acquisition will turn out to be a good deal, he added. "I think if an acquisition moves you into a new market, then it's worth it, even if you overpay initially," Kerravala said. "Facebook doesn't have much presence in messaging, and it could use some help with younger users. This was a smart move."

Facebook, which recently marked its 10th anniversary, may be the largest social network by far, but it's still dealing with the tricky issue of cultivating a vibrant and growing user base. Facebook doesn't want to become the next MySpace, and it will spend a lot of money to make sure that doesn't happen.

MySpace was a social pioneer. With a focus on linking people with their favorite musicians and movies, it was the network people went to before there was a Facebook. But MySpace was quickly eclipsed by Facebook, which focused on linking people with their friends and family.

Today, MySpace is little more than a social networking afterthought. That is what Facebook wants to avoid.

One point that must worry Facebook officials is the fact that their social network has experienced a decline in teenage users.

During a quarterly earnings call last November, David Ebersman, Facebook's chief financial officer, reported that the social network is struggling to keep teenagers' attention. "We did see a decrease in [teenage] daily users, especially younger teens," Ebersman said at the time, though he also called the teen user base "stable."

It's not a new problem for Facebook. As far back as 2009, a study released by iStrategyLabs showed that the company's pool of U.S. high school and college-age users was on the decline even as the network's popularity among the 55-and-older crowd was booming.

The social networking site that cut its teeth on college-age users is now trying to figure out how to keep the attention of that same age group.

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