Tomahawk, WI 03/03/2014 (Basicsmedia) – Facebook Inc (NASDAQ:FB) last month surprised many an investor with its premium $19 billion purchase of the otherwise little known WhatsApp outside the teen circle. Looking back at that deal can help unearth some important truth and perhaps help you decide what to do with your Facebook stock.

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To acquire WhatsApp, Facebook Inc (NASDAQ:FB) paid more than the market cap of Southwest Airlines Co (NYSE:LUV) or Xerox Corp (NYSE:XRX). But was that move justified or did the social media giant simply make a desperate bet since it feared suffering the same fate as it did when it aimed for SnapChat?

Reason justified

The long story short, acquiring WhatsApp for $19 billion was not only highly justified but also happened at a very fair value if one bothers to look at the key metrics.

Competition is growing in the social media sector and players are looking for the key drivers of growth and betting on them. The future of social media stocks is viewed through the number of active users. It so happens that higher market cap stocks have the higher number of users and so is revenue. So then, it was only fair, if not necessary, that Facebook Inc (NASDAQ:FB) settled for WhatsApp.

Look, Facebook Inc (NASDAQ:FB) is paying less for WhatsApp which currently has monthly active users that exceed Twitter Inc (NYSE:TWTR), Pandora Media Inc (NYSE:P) and LinkedIn Corp (NYSE:LNKD). Moreover, WhatsApp has its user-base increasing by almost a million every day.

Facebook Inc (NASDAQ:FB) has been announcing increase in its user numbers, however, it has also been proven that the company is not doing as well among teens on social media. Thus, WhatsApp will be able to effectively make up for more than what Facebook Inc (NASDAQ:FB) may have lost or might lose in teen world through its main platform.

Investor Takeaway

Sometimes Facebook Inc (NASDAQ:FB) makes what might on a casual glance look like ridiculous purchases. The company offered $1 billion for the purchase of Instagram, a company that had no name or revenue by the time of the deal. But look, here it is with more than 150 million active users and could be valued well beyond $10 billion. So then, it is just a matter of time before every investor begins to nod in approval of the WhatsApp deal.

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