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

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

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Facebook CEO Mark Zuckerberg, who became the world's youngest billionaire, is at the helm of a company that may no longer be seen as the fresh, cool site.

That's a problem because Facebook wants to hook young users who will stick with the site for the next 50 years. Facebook doesn't want only older people who have fewer years to invest in the company.

"The $16 billion is certainly a large amount of money to pay for a company, but I see it as an investment for the future," said Brian Blau, an analyst with Gartner. "It's a way that Facebook can reach a new and different user base, one that potentially has a different demographic, as well. Those could be very valuable users to Facebook over the long term."

The purchase also will boost Facebook's mobile efforts.

A few years ago, Facebook was struggling to build a mobile user base. In 2012, just before the company launched its initial public offering, executives listed mobile as one of its biggest risks. Eight months after its IPO, more users were accessing Facebook from mobile devices than from PCs and laptops, and more importantly, mobile accounted for 23% of Facebook's ad revenue, up from 14% the previous quarter and zero a year earlier.

Having WhatsApp's mobile messenger app could bolster the company's mobile presence even more.

"WhatsApp enables Facebook to own peer-to-peer communication across all mobile devices," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "This is in contrast to just using Messenger inside of Facebook. A lot more people use WhatsApp than Facebook's Messenger, and that means Facebook was missing out on those interactions."

By buying WhatsApp, he added, Facebook is not only gaining all of the app's users but also setting up a buffer against sites like Snapchat that are gaining popularity with younger users.

"Facebook has obviously estimated that WhatsApp's 450 million monthly users, with the addition of 1 million new registered users per day, equated to a net future cash flow of far greater than $16 billion," said Moorhead. "Mobile is everything for Facebook because it's about all about growth."

This article, "Facebook Coughs Up $19B to Buy Younger Users," was originally published on Computerworld.com.

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter, at @sgaudin, and on Google+, or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

Copyright © 2014 IDG Communications, Inc.

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