Facebook buying WhatsApp for $19 billion is a tough pill to swallow. When I first heard the news, all I could ask myself was: How can an app be worth so much money?! Indeed, when the app in question has nearly half a billion active users, circumstances permit for a little bit of rule breaking. But in the case of WhatsApp, rules weren’t just a little broken. They were shattered.

All biases, emotions, and shock aside, the move is indicative of a technology giant (with boat loads of money) being afraid of a powerful competitive threat. After all, in the mobile messenger space barriers to entry for new businesses are relatively low. Moreover, the threat of existing competitors is as apparent as their ability to maintain relevance among users. In the last five or so years, WhatsApp has made a big entrance into the messenger market and is loved by millions of people the world over. Naturally, Facebook had no other option but to take notice.

Let’s try to think about the deal more pragmatically for a second and ask ourselves: What is the “opportunity cost” Facebook would have had to incur had it not pursued WhatsApp? Be aware that in this case we are referring to opportunity cost as the amount of users gained through the transaction and their corresponding monetary value (perceived or potential). The answer: A LOT.

As Parmy Olson illustrates in a recent Forbes article, WhatsApp is well positioned to make Facebook a lot of money, provided Facebook does all the right things to tap into the company’s full potential. WhatsApp’s business model is still in a state of flux and the forward-looking profit potential is anybody’s guess. But the company has been charging customers in only a few countries, and it has several viable avenues to explore when it comes to monetizing users independently as well as through channel partners. The assumptions underlying the case for a proactive and profitable deal are promising and realistic, provided WhatsApp continues to maintain its popularity among fans and there isn’t a big shift towards the next big messenger app. That continues to be the biggest risk; however, that’s just the nature of the industry.1

Once the acquisition dust settles, it’ll be interesting to see whether Facebook’s decision to buy WhatsApp was in fact worth the $19 billion. Only time will tell. One thing is certain though. This acquisition reaffirms the notion of survival through sacrifice.

1 Olson, Parmy. “Inside The Facebook-WhatsApp Megadeal: The Courtship, The Secret Meetings, The $19 Billion Poker Game.” Forbes. Forbes Magazine, 04 Mar. 2014. Web.

- Qasim