The price of youth: $US19 billion

Feb 21: Facebook agreed to buy WhatsApp for $US19 billion yesterday because it needed to make a bold move to retain relevance among younger users, research company Analysys Mason says.

Young people are the core constituency of messaging apps, says Analysys Mason, and Facebook failed to anticipate the way that messaging apps have transformed social networking on mobile devices.

Facebook's own Messenger app has slipped in the rankings and WhatsApp Messenger has emerged as the global leader, says the research company (which has carried out high-profile work for Vodafone, Telecom and, this month, Chorus).

WhatsApp has a user base of 450 million (with smartphone penetration rates as high as 80% in some countries, Analysys Mason says, with a stronger bias towards the young than Facebook.

How to monetise WhatsApp?
Facebook has stated that it will not introduce intrusive ads into WhatsApp, which is free for 12 months then costs $US0.99 a year.

But there are alternative routes to advertising revenue, Analysys Mason says. 

Facebook can use WhatsApp data to enrich its social graph and identify influencers in communication networks. The data can be used to enhance its service to advertisers via established channels. It will also seek to emulate the likes of WeChat, Line and KakaoTalk by monetising gaming, stickers and in-app purchases. 

Facebook buys WhatsApp for $US19 billion

Feb 20: Facebook has agreed to buy messaging company WhatsApp for $US19 billion ($US4 billion in cash, the balance in shares) - a record for a company backed by venture capital investors.

The 55-employee WhatsApp offers a service that lets people send messages from their smartphone over the internet, avoiding phone company txt message charges.

The privately held company claims that over the past year nine months, its service has doubled to 450 million monthly users.

On a conference call with media and analysts today, Facebook CFO's said 70% of  WhatsApp users are active each day. 

WhatsApp competes with a number of services that allow smartphone users to use the internet instead of the traditional phone network for calls, video chat and messaging, including Skype (bought by Microsoft for $US8.5 billion in 2010), Apple's iMessage service for iPhones, Viber, and Google's HangOut and other services.

Facebook says it will allow WhatsApp to keep its own identity, and branding. Currently, a core part of its identity is that it's a ad-free service, no cost service (or at least very low-cost. WhatsApp is free to download and try for the first year. After, you have the option of extending your subscription for $US0.99 per year).

But the social network is paying around $US40 a user for WhatsApp; odds are that something will change.