So began the most lucrative two-year courtship in technology history, one in which admiration led to friendship and then, in a last-minute hurry, to an unprecedented transfer of wealth, all signed and sealed on the door of the welfare office Koum, 38, once haunted. Last month Facebook bought WhatsApp for $4 billion in cash, $12 billion in stock (8.5% of the company) plus $3 billion in restricted shares.
The deal cements Zuckerberg as tech’s new billionaire-maker. Koum, a shy but brilliant engineer who moved from Ukraine to the U.S. with nothing, will join the Facebook board and, after taxes, pocket $6.8 billion.
WhatsApp’s speed and deceptively simple interface could see it permanently trump its peers in the same way Facebook beat out rivals MySpace and Orkut, but its old-fashioned business model is unusual. Though other messaging apps like China’s WeChat, South Korea’s KakaoTalk and Canada’s Kik significantly trail WhatsApp in active users, they’re free and they sell ads, games and digital stickers that have seen them book heftier revenues.
WeChat, owned by state-backed Tencent and billionaire Ma Huateng, is letting some of its 270 million active users buy snacks in vending machines in the Beijing subway as an e-payments experiment. Analysts at Barclays estimate it to be worth $30 billion. Kakao is forecasting $200 million in revenue for 2013, deriving half of that from games. LINE, widely expected to IPO this year at a reported $8 billion valuation, brought in $336 million in 2013 revenue from a mix of selling digital stickers, in-app games and special accounts for advertisers.
Such extras are “junk,” says Acton. He fears stickers would draw WhatsApp into the content business; LINE’s series of bunny and bear sticker characters have already made appearances on TV shows in Japan. The unsexy mission of WhatsApp is reliability.
For now Koum is staying focused on the two priorities: keeping WhatsApp running and keeping users from going away. He can do so without the burden of building out the financial and legal infrastructure of a wholly independent company. “Fundamentally what we care about is building a product and great user experience,” he says. “[Mark] understands the network effect and he always talked about making the world more open and connected. Connected is where we come in.”
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With Facebook’s massive $19 billion purchase of WhatsApp earlier today, any possible marriage between Facebook and Snapchat appears to be dead.
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