$19 billion — $16 billion in stock and cash as well as additional $3 billion in restricted stock units Facebook will dish out for WhatsApp — is an absurd amount of money to present to 55 people. That's the subtext below most of the outraged, stunned, and/or cheerleading reactions to Wednesday's news that Facebook was buying WhatsApp in the largest and strangest tech world buyout since AOL snapped up TimeWarner in 2000. 
 
 You think this many people are fascinated by what this means for the future of messaging or Facebook corporate strategy? Nope. Deep down, either with doe-eyed dreams of what we'd spend it on or a creeping horror at the gaudy zeros on that number, we're all following the money. 
 
 And no wonder. $19 billion is more than the GDP of Iceland; of Jamaica; of Monaco and Bermuda and Fiji put together. Facebook could have bought Southwest Airlines, which has lower market cap; it could have grabbed the Gap. Instead, it snapped up an app for 19 times the cost of the last major app it snapped up. 
 
 No, Zuck has not lost his head. Yes, WhatsApp is phenomenally successful at growing its customer base, more so than Facebook and in all the right countries. You skate to where the puck is going to be, and WhatsApp is going to be at a billion users in a handful of years. From the perspective of Facebook, flush with cash, there is sound fiscal reasoning at work here, a legitimate bet. 
 
 For the rest of us, however, there's some serious mental readjustment to be done. This is the world we live in now, where a mobile app maker can sell itself for as much as NASA's entire budget. There is readjustment even among the people who study this for a living. Nobody got a scoop here: the whole of tech journalism was caught flat-footed. Some of us scrambled to recall articles written two years previously predicting this possibility, disregarding the fact that nobody did or could have predicted this price tag. 
 
 There is nothing about this deal that's comfortable to comprehend — and that's not necessarily a bad thing. The U.S. just had its eyes opened a little further to the rest of the world. Silicon Valley was shown how to build a social media powerhouse without many homegrown customers. 
 
 WhatsApp's strategy may yet turn out to be a business model powerful enough to compete with the online advertising model: get people hooked on a free service with no ads, get as big as possible, then charge a dollar a year and watch $450 million roll in, providing nobody takes umbrage and leaves. 
 
 But you can't stay neutral about the purchase price. Either you have to become a cheerleader for unfettered capitalism — the $19 billion app as the American dream! — or you have to admit to some uneasiness at the kind of economy we've consciously created. Facebook stock plummeted 5% as soon as the deal was announced, and although it party recovered, that's an indication that even the global pool of money thinks this offer is out of all proportion. 
 
 See also: Facebook Has No Plans to Bring Ads to WhatsApp 
 
 It seems appropriate that the last time this happened was AOL buying Time Warner, because that was the last time the market sensed a deal that seemed to show an economy out of joint. I was there at the Time magazine offices the morning Steve Case and Jerry Levin walked in to announce that deal. 
 
 Tasked with reporting on our new corporate overlords, for months, I couldn't fight the nagging feeling: Something's badly wrong here. Everyone who wasn't in upper management sensed it. How could a company that relied on selling a training-wheels version of the Internet buy the world's then-mightiest media conglomerate? 
 
 With hindsight, of course, we all can see it didn't make any sense. Sure, AOL-Time Warner made fiscal sense to Case and Levin. For the market, it was the starting gun for what became the 2000 dotcom crash. Nobody who lived through that will ever forget it, the way the confidence suddenly drained out of the information economy. 
 
 I don't think WhatsApp is proof we're in a similar kind of bubble. The tech world is in a much stronger position now; we've got true online giants, not pretenders to the Internet throne. These giants have a ton of cash, and they're going to keep making deals like this with companies they deem worthy. It's what any rational economist would tell them to do. 
 
 But perception matters, and I do think the WhatsApp deal will deliver a permanent kick to the zeitgeist. Here we are in 2014, it says, and there are no more moonshots. Our big ideas all seem to be old ones on a smaller screen. The climate is changing permanently in very weird ways, we're surrounded by famine and flood and bloody revolution, but fear not. We'll have great apps. 
 
 Conglomeration and consolidation is, sadly, as much a fact of life in the new economy as in the old one. The giants can't stand to see anyone else flourish, and they buy up walls of purchases and acres of patents against each other. And what do we really get in return? San Francisco, already the most expensive city in the US, gained another 38 millionaires and 2 billionaires: great. 
 
 For WhatsApp users and Facebook users, they have been repeatedly assured, nothing will change. WhatsApp will run as an independent entity. So what happened here, exactly? One of the smartest companies in the world spent $19 billion and the future of innovation wasn't advanced one iota. 
 
 Who's afraid of the WhatsApp deal? Perhaps we all should be. 

 Facebook is buying WhatsApp, agreeing to pay $19 billion in cash and stock for the popular smartphone messaging service. 
 
 Revealed today in a filing with the Securities and Exchange Commission, the deal is Facebook’s largest acquisition to date, but it’s just the sort of move the company was expected to make. The social networking giant has been quietly exploring the use of WhatsApp and other messaging services popular among teens, a demographic where Facebook’s influence has begun to wane. Recently, the company failed in its efforts to acquire another of these teen-centric services, SnapChat, and it has now filled the gap with WhatsApp. 
 
 On a recent earnings call, Facebook admitted that teens are spending less time on its service, and a tool like WhatsApp is a way of pushing this trend in the other direction. Facebook offers its own messaging services for smartphones — including a SnapChat clone — but WhatsApp gives it instant access to a new and relatively large group of youngsters who are actively messaging each other on a daily basis. According to Facebook, the service now spans 450 million monthly users, and about 70 percent of those are active on any given day. 
 
 The deal is Facebook’s largest acquisition to date, but it’s just the sort of move the company was expected to make 
 
 According to the SEC filing, Mark Zuckerberg and company will acquire all outstanding stock and options in WhatsApp for about $4 billion in cash and 183 million Facebook shares, which are currently worth about $12 billion. The deal also includes an additional $3 billion in stock that will go to the founders and employees of WhatsApp. Jan Koum, the WhatsApp co-founder and CEO, will join the Facebook board. 
 
 “WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” read a statement from Zuckerberg. “I’ve known Jan for a long time and I’m excited to partner with him and his team to make the world more open and connected.” 
 
 Facebook is by far the world’s most popular social network, with over 1.2 billion users worldwide. But if Zuckerberg and crew are to retain their hold on the world — and continue to expand its efforts to serve ads to all those people — they must continue to evolve with the ever-changing tastes of the teenage set. For this reason, the company won’t fold WhatsApp into its existing service. 
 
 As it has done with the photo-sharing site Instagram — another recent purchase — Facebook will continue to operate WhatsApp as a largely standalone service, under the existing WhatsApp name. That’s what the company said in its press release, but more importantly, it’s the best way to retain the young set of users the company has just paid so much for. 
 
 In many ways, WhatsApp’s breed of smartphone messaging is “the killer app,” something that can capture the attention of users no matter where they are or what else they’re doing. And ultimately, services like this can be great place to serve ads. For Facebook, the trick is to find subtle yet effective ways of dovetailing myriad smartphone apps with its larger service, of eventually bringing teens and others into the larger fold. 
 
 It’s a trick the company must learn well. Increasingly, the world is moving away from sites like Facebook.com and towards a wide range of applications loaded onto mobile phones. Clearly, Facebook recognizes that its future lies with tools like WhatsApp. Now, the task is to make it happen. 

 The WhatsApp Inc. mobile-messaging application WhatsApp and the Facebook Inc. application are displayed along with other apps on an Apple Inc. iPhone in this arranged photograph taken in Hong Kong, China. 
 
 The WhatsApp Inc. mobile-messaging application WhatsApp and the Facebook Inc. application are displayed along with other apps on an Apple Inc. iPhone in this arranged photograph taken in Hong Kong, China. Close 
 
 The WhatsApp Inc. mobile-messaging application WhatsApp and the Facebook Inc.... Read More 
 
 Facebook Inc. (FB)’s $19 billion purchase of WhatsApp Inc. is valuing the text-messaging service at a multiple investors currently only bestow on companies developing life-saving drugs. 
 
 Based on a goal of reaching 1 billion WhatsApp subscribers, Facebook is buying the mobile application for about 19 times estimated sales, according to data compiled by Bloomberg. The only U.S. companies that fetch such lofty valuations are drugmakers that are developing treatments for cancer, Crohn’s disease and other ailments, the data show. 
 
 While the price tag may seem steep at first blush, Facebook is betting it will prove a lucrative long-term investment. The mobile-messaging service could help Facebook generate more growth from younger users that are slipping away, according to FBN Securities Inc. The dollar amount being paid per WhatsApp user is about a third the value Facebook shareholders place on the social media company’s own user base, data compiled by Bloomberg show. 
 
 Related: 
 
 “It’s a staggering amount,” Roger Entner, an analyst at Dedham, Massachusetts-based Recon Analytics LLC, said in a phone interview. “It’s 19 billion reasons why mobile matters and why it is the future of Facebook.” 
 
 WhatsApp, which has more than 450 million monthly users currently, is “on a path to reach over 1 billion people worldwide in the next few years,” Mark Zuckerberg, Facebook’s co-founder and chief executive officer, said on a conference call with analysts yesterday after the companies announced the takeover. 
 
 Photographer: Brent Lewin/Bloomberg The WhatsApp Inc. mobile-messaging application WhatsApp is displayed on an Apple Inc.... Read More The WhatsApp Inc. mobile-messaging application WhatsApp is displayed on an Apple Inc. iPhone in this arranged photograph taken in Hong Kong. Close Close Open Photographer: Brent Lewin/Bloomberg The WhatsApp Inc. mobile-messaging application WhatsApp is displayed on an Apple Inc. iPhone in this arranged photograph taken in Hong Kong. 
 
 High Valuation 
 
 Subscribers use the messaging app for free for the first year and are charged 99 cents a year after that. One billion paying users would translate into about $1 billion in annual sales, bringing the projected revenue multiple that Facebook is paying to 19, data compiled by Bloomberg show. 
 
 Only 35 U.S.-based publicly traded companies have a price-sales ratio of 19 or higher, according to data compiled by Bloomberg based on analysts’ estimates for three years from now. All are in the biotechnology or pharmaceutical industry, including companies such as Puma Biotechnology Inc. (PBYI), which has an experimental breast-cancer treatment, the data show. 
 
 WhatsApp has turned itself into the next Facebook, as it adds more than 1 million users daily, said Tom Taulli, who analyzes acquisitions for MasterCFO.com. The messaging service offers a new source of revenue and growth for the 10-year-old social media company, he said. 
 
 Paying Up 
 
 “If Facebook wants to keep growing, it’s going to have to pay premium prices to do it,” said Taulli, who is based in Los Angeles. “They’re going to have to do deals that make a difference and that means huge user bases, very entrenched, very important parts of the market, and it also means that they know they’re going to have to pay top dollar for it.” 
 
 Facebook said in October that younger teens aren’t using its website as much as they used to. The company offered about $3 billion to acquire Snapchat Inc., a person familiar with the matter said in November, in an apparent push to recapture younger consumers. The start-up turned down the offer for its app, which lets users send annotated photos that disappear. 
 
 Shares of Facebook rose 2.3 percent to $69.63 today. 
 
 While Facebook may view the WhatsApp acquisition as an important strategic step in mobile messaging, it’s overpaying, said Entner of Recon Analytics. 
 
 “It’s ludicrous,” he said. “It reminds you of the dot-com bubble all over again. We’re heading toward a bubble, if we’re not already there, with what they are paying.” 
 
 ‘Strategic Sense’ 
 
 WhatsApp’s growth may be tempered in the U.S. as phone carriers begin offering free messaging services, Entner said. 
 
 Facebook’s market value of $173 billion yesterday is equal to 144 times its 1.2 billion monthly active users. The Menlo Park, California-based company is paying about 42 times WhatsApp’s user base, or $42 per subscriber, data compiled by Bloomberg show. By comparison, Tokyo-based Rakuten Inc. bought the Viber Internet messaging and calling service for $900 million earlier this month, paying about $3 per Viber user, data show. 
 
 The WhatsApp takeover “looks expensive,” Shebly Seyrafi, a New York-based analyst at FBN Securities, said in a phone interview. “But I think this deal makes a lot of strategic sense. They can eventually get to 1 billion subscribers. So the valuation isn’t necessarily out of whack for a company that’s growing extremely fast.” 
 
 To contact the reporters on this story: Tara Lachapelle in New York at tlachapelle@bloomberg.net; Brooke Sutherland in New York at bsutherland7@bloomberg.net 
 
 To contact the editor responsible for this story: Beth Williams at bewilliams@bloomberg.net 

 The relationship between Facebook Inc. and WhatsApp Inc. started in spring 2012 over coffee at a German bakery. It was consummated on Valentine’s Day with chocolate-covered strawberries, after just five days of talks. 
 
 Facebook, the world’s largest social network, agreed yesterday to acquire mobile-messaging startup WhatsApp for as much as $19 billion in cash and stock, seeking to expand its reach among users on mobile devices. 
 
 Mark Zuckerberg, Facebook’s chief executive officer, first reached out to WhatsApp CEO Jan Koum in early 2012, inviting him for coffee at the bakery in Los Altos, California. They ended up talking for more than two hours, according to a person with knowledge of the matter. 
 
 The two became friends, meeting frequently for dinners and hiking together. 
 
 Related: 
 
 On Feb. 9, Koum, 38, went to Zuckerberg’s house in Palo Alto, California, for dinner. That’s when the conversation about a possible deal became serious, the person said. The two first talked about how they could work together more closely on Zuckerberg’s Internet.org initiative for connecting the world on mobile devices. 
 
 Zuckerberg, 29, then proposed that their companies join together and that Koum join Facebook’s board. Koum took a few days to think it over. Five days later, on Feb. 14, Zuckerberg was having dinner with his wife at home when Koum showed up, strawberries in hand. They then negotiated a price. 
 
 Photographer: Marc Müller/DPA via AP Images Jan Koum, co-founder and chief executive officer of WhatsApp Inc. Close Jan Koum, co-founder and chief executive officer of WhatsApp Inc. Close Open Photographer: Marc Müller/DPA via AP Images Jan Koum, co-founder and chief executive officer of WhatsApp Inc. 
 
 Biggest Deal 
 
 The purchase would be the biggest Internet deal since Time Warner’s $124 billion merger with AOL in 2001, according to data compiled by Bloomberg. The accord includes $12 billion in stock, $4 billion in cash and $3 billion in restricted shares, Facebook said yesterday. WhatsApp has more than 450 million members, with 1 million users being added daily, Facebook said. 
 
 The shares of Menlo Park, California-based Facebook rose 1.8 percent to $69.30 at 3:05 p.m. in New York. 
 
 Mountain View, California-based WhatsApp, which is popular in Europe, lets users send messages through its service on mobile devices based on different operating systems including Apple Inc.’s iOS, Google Inc.’s Android, Microsoft Corp.’s Windows Phone and BlackBerry Ltd.’s software. 
 
 Google also expressed interest in acquiring WhatsApp, two people with knowledge of the matter said. Tim Drinan, a spokesman for Google, declined to comment on an offer. 
 
 Unlike traditional text messages, which consumers pay for through their mobile-phone plans, WhatsApp is free for the first year and costs 99 cents a year after that. It competes with Tencent Holdings Ltd.’s WeChat in China, KakaoTalk in South Korea and Line in Japan, as well as Facebook’s own application, Facebook Messenger. 
 
 Food Stamps 
 
 Koum co-founded the company with Brian Acton, 42, in 2009 after almost a decade as an engineer at Yahoo! Inc. Venture capital firm Sequoia Capital invested $8 million in WhatsApp in 2011, for a more than 15 percent stake that is now worth about $3.5 billion, according to people with knowledge of the deal. 
 
 Koum’s likely windfall from the deal stands in stark contrast to his years as a teenager, when his family relied on food stamps after emigrating from Ukraine. 
 
 Acton grew up in Michigan and was employee No. 44 at Yahoo, working on advertising, shopping and travel services, according to Wired. He later hired Koum at Yahoo and served as his mentor, inviting him over to his house and taking him skiing, Forbes said. 
 
 Yahoo Rejection 
 
 Acton said Facebook turned him down for a job in an August 2009 Twitter post. He introduced WhatsApp the same year. 
 
 “Looking forward to life’s next adventure,” he wrote. 
 
 The two founded WhatsApp with the idea that smartphone users should be able to easily message each other without incurring fees from phone carriers. They eschewed marketing and didn’t employ a public relations person, relying on the word-of-mouth recommendations of its users instead. 
 
 Koum said in a statement on the company’s website that WhatsApp will remain autonomous and operate independently. 
 
 “There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product,” he said. 
 
 To contact the reporters on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net; Alex Sherman in New York at asherman6@bloomberg.net 
 
 To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net
– Facebook just spent $19 billion—yes, that's billion, with a "b"—on a messaging app that's relatively unheralded for a service with 450 million users. Why? How? Are they crazy? Here's what people are saying: The acquisition is all about teenagers, writes Cade Metz at Wired. Facebook recently admitted that teens are spending less time on its site, and if it wants to stay on top it has to "evolve with the ever-changing tastes of the teenage set," and right now, they're on WhatsApp. WhatsApp also has the almost unique power to "capture the attention of users no matter where they are or what else they're doing." Bloomberg points out that with that pricetag, Facebook is valuing WhatsApp at 19 times sales, "a multiple investors currently only bestow on companies developing life-saving drugs." And that's assuming WhatsApp does expand to a billion paying users. "It's ludicrous," one analyst says. "It reminds you of the dot-com bubble all over again. We're heading toward a bubble, if we're not already there." Yes, it's an "absurd amount of money to present to 55 people," and yes it reminds you of the AOL/Time Warner merger, the last deal this big, writes Chris Taylor at Mashable. But it's not crazy. "You skate to where the puck is going to be, and WhatsApp is going to be at a billion users in a handful of years. From the perspective of Facebook, flush with cash, there is sound fiscal reasoning at work here, a legitimate bet." At the same time, Taylor adds, the rest of us have to adjust to a world in which one of the world's top companies just bought an app for more than the GDP of Iceland "and the future of innovation wasn't advanced one iota." Friendship may have played a big part in the deal, too. Mark Zuckerberg first invited WhatsApp's CEO out for coffee in early 2012, Bloomberg reports, and they've become fast friends since, "meeting frequently for dinners and hiking together."