So why did Facebook pay a staggering $19bn for WhatsApp?

Whether it's world-domination it's after, or a step towards becoming a broader conglomerate, the social network has made a smart business move

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We often like to think about Facebook as a monolithic entity, a corporate nightmare of the internet age hell-bent on a single mission: assimilating the world’s population into a single social network. However, as the company’s recent acquisition of messaging app and SMS-replacement WhatsApp shows, the truth is far more complex – and more intimidating - than this.

Firstly, there’s the mind-boggling scale of the numbers involved. With more than 1.23 billion users and a market valuation of $173 billion Facebook has always had a good stock-in-trade in figures that seem more astronomical than economical, but the purchase of WhatsApp is astounding even for them.

Totting up all the cash and stock options involved Facebook has paid a staggering $19 billion for WhatsApp, a figure that values each of the app’s 450 million users at around $42 a head. Considering that WhatsApp is free for the first year of use and only charges $1 a year after this seems like a gross overvaluation – it’s even more than the $30 per user that Facebook paid for Instagram and its 33 million users back in 2012. But both of these purchases show Facebook’s sheer determination not to miss out on an opportunity for growth. Hell-bent seems to be the right term.

But what are they buying with WhatsApp? Well, there’s the demographics where Facebook’s dominance is waning (teens) and markets where they’ve never been that strong in the first place. WhatsApp is not only popular amongst emerging markets but it has a lot of influence in European countries where Facebook Messenger (the company’s standalone messaging app for smartphones) hasn’t made a dent. In Spain, Switzerland and the Netherlands WhatsApp has more than 80 per cent market share while Facebook Messenger has less than 15 per cent. With the purchase of WhatsApp, Facebook is certainly ‘assimilating’ more users.

However, this is where we must part ways with the paranoid’s fantasy of Facebook. For all its growth and influence, Facebook is actually becoming less monolithic. It’s diversifying and adapting to the varied demands of users worldwide. In some ways this is comforting (the dystopic future where we’re all hooked up to the same social network is less likely to happen) but it’s also more intimidating as the possibility of a world where Facebook controls the world’s social connections becomes a more realistic prospect.

Tech writer Kara Swisher has compared the social network to Disney, describing how the social network is transforming from a company into a conglomerate. A corporate structure nurtures a key set of skills (marketing, advertising, scaling software) while different brands are used to appeal to a range of tastes. Google has already done this, raking in the winnings it took from cracking online search and spreading them out over a range of concerns from robotics to healthcare. America’s tech companies have even been likened to keiretsu; the sprawling Japanese companies like Mitsubishi and Toyota that dominated the country’s economy following World War II.

Often this sort of comparison can sound like an exaggeration: how can you compare a company that makes it money from ‘likes’ and mobile messaging with industrial giants that churned out cars and controlled whole banks? But with the purchase of WhatsApp, Facebook has not only began eating away at the SMS market (one that’s still worth $100 billion a year) it’s made the company’s talk of “the next billion” users look like something that will become a reality in a matter of years. Facebook isn't monolithic - it's adapting, and getting more powerful with each headline.