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TheStreet Open House

It's a Mistake to Scoff at the Facebook Acquisition of WhatsApp

Stock quotes in this article: FB, GOOG, TSLA, TWTR

NEW YORK ( TheStreet) -- Last Wednesday, Feb. 19, I was casually going over some charts and reading the news when I saw headlines cross my Twitter (TWTR) feed that Facebook (FB) had purchased WhatsApp for up to $19 billion. 

Immediately, I scoffed and thought, What  a mistake this is! 

Sure enough, as soon as the news broke, shares of Facebook moved lower in the after-hours. But as time went by, I thought about it more while researching, and started to think it might not be so bad.

Shares have since popped back up to close at $70.78 on Feb. 24, approaching a 52-week high of $71.44 over the trading day.

I guess I thought the acquisition was a bad idea, because -- let's be honest -- $19 billion is a ton of money. I also don't use WhatsApp, and don't know a ton of people who do. Some, sure. But not a lot. 

Then I started to see graphs of this application's stellar growth, which rapidly exceeded that of Facebook or Twitter. WhatsApp's growth has been very, very impressive.

And Facebook's management seemed confident that WhatsApp -- which is wildly popular in Asia, India, and other parts of the globe -- would eventually reach 1 billion users

We've already seen Facebook, the social media king, reach that level, but if WhatsApp's growth is any indication, it too will hit the coveted ten-digit user base. 

And with 450 million monthly users, it's hard to argue with that prediction. Of those 450 million, 70% reportedly use the service every day. So in a way, Facebook is buying eyeballs. At least in the sense that it continues to purchase companies that have rapidly growing user bases that can eventually be monetized. 

Although Zuckerberg & Co. stated that it does not have any current plans to advertise on the WhatsApp platform, that doesn't mean it will not eventually happen. 

For two reasons, I want to point out Facebook's $1 billion acquisition of Instagram. At first everyone thought it was stupid. Everyone thought Facebook overpaid on the deal. 

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