TIME deals

Facebook Completes Its $22 Billion Purchase of WhatsApp

Social Networks Facebook WhatsApp.
Marie Waldmann—Photothek/Getty Images

The final hurdle in the deal was crossed on Friday, when the E.U. approved the purchase after much resistance from Europe’s telecommunications industry

Facebook officially sealed its massive purchase of WhatsApp, a report filed with the U.S. Securities and Exchange Commission stated, with a final price of about $22 billion. The popular instant-messaging app has been operating independently since agreeing to an acquisition by the social-media giant back in February, but the finalizing of the deal is undoubtedly a step toward greater support, and control, from Facebook.

Ukrainian immigrant Jan Koum and former Yahoo engineer Brian Acton, the founders of WhatsApp, pocketed $6.8 billion and $3.5 billion in the deal respectively, according to Forbes. Koum will also get a seat on the board, where his $1 salary will match that of Facebook CEO Mark Zuckerberg.

The final hurdle in the deal was crossed on Friday, when the E.U. approved the purchase after much resistance from Europe’s telecommunications industry.

“We have carefully reviewed this proposed acquisition and come to the conclusion that it would not hamper competition in this dynamic and growing market,” the Wall Street Journal reported the E.U.’s antitrust chief Joaquín Almunia as stating.

WhatsApp, with over 600 million users across Europe, Asia and the Americas, presents an immense opportunity for Facebook, although how it will be used remains to be seen.

TIME Markets

Facebook Is Now Worth $200 Billion

Facebook Holds f8 Developers Conference
Facebook CEO Mark Zuckerberg Justin Sullivan—Getty Images

The record-setting figure is still just one-third of Apple's market cap

Facebook’s valuation passed the $200 billion mark for the first time Monday. The company’s stock closed at $77.6, a new all-time high, giving it a market capitalization of $200.26 billion, according to Google Finance.

The social network has consistently impressed Wall Street analysts in its quarterly earnings reports over the last year thanks to robust growth in mobile usage and advertising revenue. Many analysts believe future prospects for the company are extremely high because Facebook has not yet begun to monetize acquisitions like Instagram and WhatsApp or place a significant number of pricey video ads in users’ News Feeds.

Facebook is also continuing to grow its user base quickly outside the U.S. The company announced today that it now has 100 million users in Africa, which it says is half the total number of Internet-connected people on the continent.

By comparison, Apple, the most valuable company in the world, had a market cap of $590 billion at the close of trading today. Google’s market cap was about $400 billion.

TIME technology

WhatsApp Now Has 600 Million Monthly Users

Fackbook Acquires WhatsApp For $16 Billion
Justin Sullivan—Getty Images

That's 100 million more than in April

Popular messaging service WhatsApp has reached 600 million monthly active users, according to the company’s CEO, Jan Koum.

WhatsApp was approaching the half-billion user mark when Facebook agreed to buy the company for $19 billion in February, and passed that figure in April.

WhatsApp is one of a variety of SMS alternatives that allow users to send mobile photos and messages to each other via the Internet. Line, a app popular in Asia, has 400 million users and Facebook’s own Messenger service has 200 million.

Facebook’s purchase of WhatsApp is expected to be completed by the end of the year.

TIME Companies

PayPal Head Jumps Ship for Facebook

David Marcus will head up Facebook’s increasingly popular Messenger app

The president of eBay subsidiary PayPal is leaving for Facebook, where he will oversee the social network’s messaging products.

David Marcus will exit PayPal on June 27 and then lead Facebook’s increasingly popular Messenger app.

The move could be a sign that Facebook is serious about finding a monetization strategy for messaging. Right now, Messenger has 200 million monthly active users who send 12 billion messages daily, but the app is free and doesn’t serve ads. Competing apps like WhatsApp—which Facebook bought for $19 billion earlier this year—and Line make money by charging a subscription fee or selling extra features, such as stickers.

“We’re excited by the potential to continue developing great new messaging experiences that better serve the Facebook community and reach even more people, and David will be leading these efforts,” Facebook said in a blog post announcing the hire.

The company plans to continue operating Messenger and WhatsApp independently.

TIME mergers

Mega-Mergers Are Killing Innovation

The latest mega-merger in the telecommunications sector, that of AT&T and DirecTV, would be the fourth largest in history, and it comes only months after the nation’s largest cable operator Comcast announced that it was buying Time Warner Cable, the second largest cable operator. Nor is telecommunications the only sector to see such acquisitiveness. Microsoft purchased the devices and services business of Nokia for $7.2 billion late last year, Google snapped up Nest for $3.2 billion in January, and Facebook bought WhatsApp for $19 billion in February.

Such consolidation can be good for consumers as bigger companies have the resources to innovate and provide new products and services which might otherwise never materialize. However, the vertical integration of the telecommunications and technology sectors can also restrict innovation due to decreased competition and the limitation of research to specific technologies that support existing business lines.

Take, for example, the acquisition of WhatsApp. Facebook’s primary reason for acquiring the company is to utilize the chat technology on its social media platform to bolster its existing messaging application, which currently lags WhatsApp in the smartphone market. Beyond that, Facebook will no doubt try to leverage WhatsApp’s own user base, currently more than half a billion, to promote its social media offering. But either way, the integration of Facebook with WhatsApp is the main goal and driver of value instead of some trailblazing technological development in the chat space itself.

Similarly, Comcast’s acquisition of Time Warner Cable enables the company to enter complementary markets without actually having to build new infrastructure in those markets or to innovate in any way. Such plug-and-play growth engenders laziness and deprives the U.S. of necessary infrastructure improvement and development. The U.S. is currently ranked a pitiable 35th in the world in broadband capacity according to the World Economic Forum, with even smaller nations outpacing us in cutting edge telecommunications.

Even when it comes to ‘pure’ or fundamental science that can form the basis of future technology, the relentless drive for commercialization limits its destiny to whatever fuels profits in the short term and can impede future research that does not support that. True, third parties could conduct research for other applications but the ironclad patents that major corporations hold on their technology can make such efforts unprofitable. In other words, the acquisition of promising technologies by major corporations can actually limit them by forcing them along proscribed lines in the future.

Some of the greatest scientific discoveries that have fueled mankind’s advancement were made in the vacuum of human curiosity without the profit motive that has now become the norm. Today, unless the process of discovery is sponsored by some major corporation or has an obvious application to industry at the outset, there is little motive to pursue it. Even research institutions, which have historically been neutral havens for such discoveries, now require corporate money to survive and are bound by corporate rules. This is a loss for the spirit of innovation that drives human achievement.

That is not to say that all acquisitions are bad or that our biggest companies don’t move us forward technologically, but if the pace of consolidation by major players continues, it could shrink the playing field to such a degree that innovation will become the sole domain of a handful of companies who, for the most part, will only finance targeted research that promotes their own bottom line, and use patents to prevent others from advancing that technology in other directions. That may be a win for commerce but not necessarily for the type of unexpected discoveries that could improve our world in the future.

Sanjay Sanghoee is a political and business commentator. He has worked at investment banks Lazard Freres and Dresdner Kleinwort Wasserstein, as well as at hedge fund Ramius. Sanghoee sits on the Board of Davidson Media Group, a mid-market radio station operator. He has an MBA from Columbia Business School and is also the author of two thriller novels. Follow him @sanghoee.

TIME facebook

Facebook Seeks EU Approval of WhatsApp Deal to Avoid Antitrust Headaches

The $19 billion acquisition isn't done just yet, as Facebook still needs regulatory approval in Europe.

Facebook has asked the European Commission to perform an antitrust review of its $19 billion WhatsApp acquisition, the Wall Street Journal reports. Such approval could help Facebook avoid dealing with numerous antitrust probes from European countries.

By getting approval at the EU level, Facebook may be able to avoid probes by individual countries, where national telecom companies may lobby aggressively to break up the deal. WhatsApp, which lets users exchange unlimited messages for $1 per year, has been hugely disruptive to the traditional text messaging business, especially outside the U.S.

In the U.S., the Federal Trade Commission approved the deal in April under the condition that Facebook and WhatsApp give notice and get permission to share information beyond their existing privacy settings.


The Reason for Apple’s Massive $3 Billion Beats Deal? Spotify

The era of digital downloads is coming to an end and Apple is still without its own streaming music product. That's why it looks poised to buy Beats for $3.2 billion, which would be its biggest acquisition ever

Why would Apple want to buy Beats Electronics?

It’s a question many tech observers have been asking since the Financial Times reported Thursday that the Silicon Valley behemoth is “closing in” on a $3.2 billion acquisition of the “high quality” headphones maker founded by music producer Jimmy Iovine and hip-hop artist Dr. Dre.

The FT suggested that Apple might be interested in Beats in order to recharge its “cool” factor at a time when streaming music services like Spotify, Pandora and Rdio have become increasingly popular with young people.

Apple’s iTunes service long dominated digital music sales, but the company never quite figured out how to present a streaming music product. Apple’s flagship music brand iTunes has been criticized over its user interface — so it makes sense that the company would be eager for outside help.

At $3.2 billion, the Beats deal would be more than three times larger than any acquisition in Apple’s history.

Apple can definitely afford the transaction — it’s sitting on more than $150 billion in cash and investments — but the company has traditionally preferred to build from within. Apple’s late co-founder Steve Jobs was fiercely proud of that fact. Unlike other tech giants, Apple has never made an acquisition larger than $1 billion.

Until now, perhaps.

Bolt-on acquisitions are in vogue in the tech world these days: Recent examples include Facebook’s acquisition of WhatsApp and Oculus (not to mention Instagram), as well as Google’s purchase of Nest and Waze, and Yahoo’s Tumblr buyout.

Dr. Dre, a musician and producer who co-founded the seminal Compton, Calif.-based hip-hop group NWA, has said that he was inspired to create Beats by the poor sound quality in many headphones. He teamed up with legendary producer Jimmy Iovine, a veteran music industry executive, to launch a brand that has proved remarkably popular.

“I knew people were going to dig it, but I didn’t know it was going to be this big,” Dre told TIME in a recent interview. “I didn’t know it was going to be at this magnitude. I know that people really care about the way their music sounds. So did I know it was going to work? Yeah, but I had no idea it was going to be this massive.”

For Apple, the streaming music service that Beats recently launched may be the most attractive part of the deal. Apple revolutionized digital music with the iPod and iTunes, but the company has yet to find a new formula to challenge Spotify, the streaming music darling of the moment.

“This is a reactive move — at best,” writes veteran tech journalist Om Malik. “Steve Jobs’ Apple would have pushed to make something better, but even he struggled to come to terms with the Internet and Internet thinking. That hasn’t changed.” (TIME’s Harry McCracken also poses some good questions about the deal.)

Subscription services are growing faster than any other area of the music industry. Music subscription revenue increased by 50% to $1.1 billion in 2013, according to a report by IFPI, the global music industry association, cited by my colleague Eliana Dockterman. Downloads fell 2% last year, in the first annual decline since Apple launched the iTunes store in 2003.

Spotify is valued at more than $4 billion, and the Swedish company is among the most high profile candidates likely to go public over the next few years. A Spotify IPO would likely blast the company’s market value into the stratosphere, so it would make sense for Apple to make a run at the company now.

But why has Apple been unable to develop a credible streaming music service internally? After all, the company has a multitude of talented software and hardware engineers.

Three reasons.

First, Apple was late to the streaming music game, perhaps because its iTunes franchise was built around buying individual music tracks. Simply put, the iTunes business model is not about streaming music.

Second, Apple’s specialty is hardware and software design, not media. The company has run into trouble in its negotiations with big media companies.

Third, Apple CEO Tim Cook is an operational wizard — and a genius at managing Apple’s supply chain and inventory — but he’s not a product visionary like Jobs.

Cook failed to anticipate that music streaming would become the new industry business model. As a result, Apple simply wasn’t set up to launch a successful streaming service of its own. And it’s not because Apple didn’t have the resources or Los Angeles connections to secure the necessary rights. It’s because the company failed to anticipate a major consumer entertainment trend.

“The age of digital downloads is basically over,” Aram Sinnreich, a media professor at Rutgers University who studies the intersection of technology and music, told Bloomberg. So now, Apple reportedly wants to buy Beats for $3.2 billion.

This situation raises a now-familiar question: What’s up with innovation inside Apple? The company makes the best consumer hardware and software in the world, but it hasn’t launched a new product category since the iPad launch in 2010. Incremental improvements to the iPhone, the iPad and the Mac computer line have been impressive, but what’s next?

One possible explanation for Apple’s interest in Beats might be the booming “wearable computing” space. After all, Beats’ signature product is the high-bass headphone unit. If Apple can incorporate the Beats product into its wearable computing system — think Internet connected headphones — then the deal could pose a threat to Google, Facebook, and other companies that are forging ahead on smart glasses and watches.

TIME Technologizer

WhatsApp CEO Jan Koum on the Company’s Latest Milestone: 500 Million Active Users

Jan Koum
WhatsApp CEO Jan Koum shows off his personal phone at Mobile World Congress in Barcelona on February 24, 2014 Angel Navarette / Bloomberg / Getty Images

Not yet part of Facebook, which is still in the process of buying it, or a household name in the U.S., the messaging app is continuing to grow, and grow and grow, adding around 25 million new active users every month

When Facebook announced its stunning agreement to acquire messaging app WhatApp last February for $19 billion in stock, cash and restricted stock units, Mark Zuckerberg said that the startup was on track to reach a billion users. That pretty much explained his interest: It’s a figure that doesn’t come up often when discussing networked services other than…well, Facebook.

As of today, it’s official: WhatsApp is halfway there.

In a blog post today, it’s announcing that the app has 500 million users–not just people who registered, but ones who are active participants. I recently sat down with CEO and cofounder Jan Koum at the company’s headquarters in Mountain View, Calif. to talk about the news.

Judging from its periodic statements over the past year, WhatsApp has been adding around 25 million new active users every month, a pace that isn’t slowing. The 500 million people now on board send tens of billions of text messages a day, along with 700 million photos and 100 million videos.

“On one hand, we were kind of expecting it,” Koum says of reaching the half-billion mark. “We got to 200 million users, 300 million users, 400 million users. It was going to happen sooner or later. But we think it’s an exciting number to share with the world and a good milestone to acknowledge what’s all been organic growth.”

In the U.S., WhatsApp is still probably best known as that company Facebook is in the process of buying. (The FTC signed off on the sale earlier this month–while emphasizing that WhatsApp must continue to abide by privacy promises it made to users–but other regulatory approvals are still pending internationally.) In much of the world, though, it’s already the app all your friends and relatives are using instead of carrier-provided text messaging.

Koum says that the app’s torrid growth tracks with the boom of smartphones–especially Android models. As people in a country join the smartphone era, some of them get WhatsApp. And then their friends and family members do, too, and the service explodes.

WhatsApp’s Android version WhatsApp

Right now, “the four big countries are Brazil, Mexico, India and Russia,” he says. “People who never used computers, never used laptops, never used the Internet are signing up.”

Rather than going after any particular country, Koum says, WhatsApp has always obsessed about the overall usage number. “We’re pretty confident that eventually we will a reach tipping point in the U.S. as well. Russia only tipped in the last six months. A switch flipped, and we took off.”

Though WhatsApp’s customer base may skew towards young people who like to share lots of quick messages and lots of photos, Koum says that it’s a mistake to assume that it’s just kids who are keeping the app growing. “We hear lots of stories where grandparents go to a store and buy a smartphone so they can keep in touch with kids and grandkids,” he says. That dynamic is helped by the app’s ridiculously easy setup–you don’t even have to create a user name or password–and features such as the ability to adjust the font size for easy readability.

The growth in smartphones isn’t enough to keep WhatsApp growing, however. There may be roughly two billion smartphones in the world, Koum notes, but between 500 million and one billion of them may be used without a data plan. In most cases, that’s because of cost, but the availability of Internet access isn’t a given everywhere.

“We take [connectivity] for granted in Silicon Valley, where you turn on your phone and see twenty different Wi-Fi networks,” he says. He told me how moved he’d been by a National Geographic photo showing people in Djibouti in the Horn of Africa standing on a beach with their phones in outstretched arms, trying to catch a stray wireless signal from neighboring Somalia, and says that he’s passionate about efforts such as Internet.org, a partnership between Facebook and mobile technology companies to bring Internet access to everybody, everywhere.

“We have no plans to change anything about how we execute.”Even in developed countries, “not everybody is on a data plan, which is unfortunate,” he says. So for the past two and a half years, WhatsApp has been busy partnering with wireless carriers around the world to offer affordable access to its service.

“We’ve done some really cool deals, and they’re not all cookie-cutter,” Koum explains. In India, you can sign up to get unlimited WhatsApp for 30 cents a month. In Hong Kong, you can buy a WhatsApp roaming pass. In Germany, there are WhatsApp-branded SIM cards, with unlimited WhatsApp service and starter credits for voice and data.

Rather than carriers looking at WhatsApp solely as a scary, disruptive force killing their ability to make money off text messaging, such offerings turn the service into a “win-win-win,” Koum says. “Users get unlimited WhatsApp. We get happy users who don’t have to worry about data. Carriers get people willing to sign up for data plans.”

The Future–and Oh Yeah, Facebook

For all of its growth, WhatsApp remains a famously lean operation: It got those 500 million active users with a team that only recently reached 60 staffers, for a ratio of over eight million users per employee. Koum says that the company doesn’t need to grow huge to serve even more folks. But “we do need more people–we’re actively hiring,” he says.

In particular, it’s beefing up its ability to provide customer support in more languages, including Portuguese, German, Ukranian, Polish and Romanian. “If anyone reading this article speaks multiple languages, they should apply,” he jokes.

When news of the Facebook acquisition broke, it inspired many people to worry about what it meant for the future of WhatsApp, whose business model has had a decidedly un-Facebookian slant in the past. The company makes money from customers–who pay 99 cents a year for service after the first year–and has been staunchly anti-advertising.

Both companies said at the time that WhatsApp would continue to be run independently and according to its existing principles, a point Koum stressed when I asked him about it.

“What makes our product work is the way we’re tightly focused on messaging and being an SMS replacement,” he says. The company plans to stick with that approach as it looks to “continuing to get to a billion users, and then two billion users. I think Facebook understands that, and Mark [Zuckerberg] understands that quite well. We have no plans to change anything about how we execute.”

As for competition from other messaging apps–and boy, is there a lot of it–Koum told me that some of WhatsApp’s rivals, such as Japan’s Line and China’s WeChat, are getting distracted from their core missions. People use WhatsApp, he says, to “keep in touch with each other, not movie stars or sports stars or random people you meet on the Internet. That’s why we’re succeeding internationally.”

“We want to do one thing and do it really well. For us, that’s communications between people who are friends and relatives.”

TIME India

The 2014 Elections Are the Most Expensive Ever Held in India

Narendra Modi Address rally In Darjeeling
A rally for BJP Prime Ministerial candidate Narendra Modi in Siliguri, Darjeeling, on April 10, 2014. Voter mobilization, campaigning and advertising costs have made this the most expensive Indian poll ever Hindustan Times—Hindustan Times via Getty Images

India's politicians are expected to spend around $5 billion on their campaigns, which makes these polls second only to the U.S. presidential elections in terms of expense

Correction appended, April 11

India’s 2014 elections are the world’s biggest exercise in democracy, with a price tag to match.

The nation’s politicians are expected to spend around $5 billion on their campaigns, which, in terms of expense, makes these polls second only to the U.S. presidential elections (they hit the $7 billion mark).

According to the initial findings of an election expenditure tracker by the Centre for Media Studies, three times more is being spent on the 2014 polls than was spent in the last general elections in 2009.

While part of this increase is because of significant inflation, much of it is a reflection of the changing expectations of a younger, increasingly demanding electorate.

“You are dealing with a new generation of 150 million voters who like to see a sense of scale,” says Dilip Cherian, founding partner of Perfect Relations, a communications group and a political campaign adviser. He says even small details, like the kind of seating being provided at rallies, are being subtly upgraded to meet demands.

“The quality of chairs that are being used at rallies, for example, has gone up from 2009. The age of the street corner rallies is over.”

The quality of messaging has gone up too. An Indian Express report says in 2009 political parties spent around $83 million on advertising campaigns. In 2014, the figure will be at least around $300 million, partly owing to a spurt in digital marketing through which politicians are hoping to connect to a younger generation.

The incumbent Congress party “has started spending on digital, which it never did in 2009,” says Mahesh Murthy, founder of the digital marketing group Pinstorm, which works for some of the leading political parties.

Upgraded voter mobilization and logistics — including the hire of helicopters and jets for star campaigners like Narendra Modi or Rahul Gandhi — are also eating up a ton of cash. Span Air, a private chartered flight company, has leased all five of its aircraft to the Congress party until the end of the elections. The hourly cost of these planes range between $1,250 and $3,000. Even a very conservative estimate—five aircrafts for 15 days at an average cost of $1,500 per hour for 8 hours a day—totals to a whopping $900,000.

Some argue that these sums simply reflect the cost of campaigning in a country the size of India. “I don’t think $5 billion for 800 million people is expensive,” says Mohan Guruswamy, a Delhi-based political observer. “Democracy doesn’t come cheap.”

Correction: The original version of this story misstated the amount the Congress party is spending per day on chartered planes.

TIME messaging

WhatsApp Just Reached an Impressive New Milestone

Fackbook Acquires WhatsApp For $16 Billion
Justin Sullivan—Getty Images

The mobile messaging platform WhatsApp is getting more popular. The company announced via its Twitter account Monday night that it processed a record 64 billion messages in a single day recently. The total was comprised of 20 billion messages sent by users and 44 billion received. That’s up significantly from the last publicly disclosed figure of 54 billion messages (18 billion sent, 36 billion received) processed on New Year’s Eve 2013.

Facebook agreed to pay $19 billion for WhatsApp in February because CEO Mark Zuckerberg thinks the messaging app can grow from its current 450 million monthly users to 1 billion users within a few years. The companies said WhatsApp was adding 1 million new users each day at the time of its purchase. Clearly it’s still growing at a healthy clip.

The figures also show that WhatsApp is increasingly being used for group discussions. On New Year’s Eve, a WhatsApp user sent a message to two people on average. On the new record day, people sent messages to 2.2 people on average, a 10 percent increase. Internet users are increasingly looking for private platforms to have discussions, such as WhatsApp and Snapchat, rather than openly broadcasting all their thoughts to their social network on Facebook. But Zuckerberg now owns the fastest-growing platform for that purpose.

In fact, all of Facebook’s high-profile properties are growing quickly. Last week the company revealed that Instagram has passed 200 million monthly users, up from 150 million users in September.

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