A day after Facebook said it will spend nearly 8 percent of the company's stock and more than a third of its cash to buy mobile messaging service WhatsApp, skeptics Thursday questioned the wisdom and math of CEO Mark Zuckerberg's plan.

But by agreeing to pay up to $19 billion in the deal, Zuckerberg -- who faced early criticism for being slow to recognize the mobile computing trend -- now seems determined not to miss that wave again. After building Facebook's own mobile business in the past year, he is more than willing to scoop up other dominant companies to make sure mobile consumers have no reason to go somewhere else.

"Facebook is really breaking up into a lot of different products and brands on the mobile screen," said David Rogers, a digital media expert at Columbia Business School. As more people use smartphones and tablet computers, he added, "Zuckerberg recognizes that people are increasingly drawn to single-purpose apps."

Call it the conglomerate strategy: Just as General Motors makes Chevys and Cadillacs, and Procter & Gamble sells home products under dozens of brands, Facebook is either building or buying mobile apps that, in many cases, will operate under separate names.


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Facebook executives say that's the plan for both WhatsApp and Instagram, the mobile photo-sharing service that Menlo Park-based Facebook bought two years ago in a $1 billion deal that seemed pricey at the time. Each service will operate under its own popular brand -- much in the way Google has let YouTube build a thriving online video business under its own name.

Experts said Facebook's strategy recognizes an important fact about smartphones and tablets: On those small screens, many users don't want to jump through multiple Web pages to get what they want. They expect to tap an icon once and open an app that lets them perform the task they have in mind -- whether it's sharing a photo or sending a message to a friend.

"Facebook was the dominant picture and messaging company on the desktop," BTIG Research analyst Richard Greenfield said in a research note Thursday, referring to the days when most people used the service on personal computers. While Zuckerberg has in the past year built an impressive ad business on mobile, Greenfield said Instagram and WhatsApp would help cement Facebook's mobile dominance over pictures and messaging.

Whether that makes WhatsApp worth $19 billion is up for debate. Though the stock gained more than 2 percent Thursday, some analysts privately said the deal underscored concerns about an Internet "bubble." Ben Schachter of Macquarie Securities declared the price "unfathomable" in terms of any immediate return, though he said the long-term value is unclear.

Scott Rothbort of Lakeview Asset Management went even further: "I predict," he wrote, "this will go down as one of history's biggest acquisition blunders."

But fans of the deal focused on a different set of numbers besides the price tag: WhatsApp boasts 450 million active users, and Facebook executives say it's on track to reach 1 billion in the next couple of years.

The top handful of mobile messaging apps, in fact, collectively boast more than twice Facebook's 1.2 billion active users worldwide. That's a trend "too large for Facebook to ignore," said Colin Sebastian of Baird Equity Research.

Having seen other social media stars like Zynga and MySpace come crashing down when user tastes shifted, Zuckerberg would undoubtedly prefer to have people using Facebook's services, even under different brands, said Rogers, the Columbia professor.

WhatsApp also provides Facebook with another entry point for teenagers and users in developing nations, where messaging apps are extremely popular, several analysts said Thursday.

And even though WhatsApp founder Jan Koum has been adamantly opposed to selling ads, several analysts said they see other ways for the app to make money.

WhatsApp is free to download but users must pay an annual fee of $1 after the first year. If the number of users grows as fast as Facebook expects in the next two years, that could mean $1 billion in annual subscription revenue alone, said Robert Peck, a tech stock analyst with SunTrust Robinson Humphrey.

That would make Facebook's $19 billion outlay smaller, in proportion to revenue, than the current stock market values of Facebook, Twitter or Google, Peck noted.

But it's not clear how many users will stick with the product once their free one-year trial ends. It was only in August that Koum announced a change to WhatsApp's pricing plan; previously, iPhone users paid only a one-time fee of 99 cents.

Other analysts suggested the service could add moneymaking features, such as selling virtual goods or even real-world products. Facebook executives declined to speculate on revenue sources during a conference call Wednesday. But CFO David Ebersman insisted, "We're confident that given the size of the market, the deal will achieve returns over time."

WhatsApp may also have value for Facebook as a defense against rivals. Fortune, citing unnamed sources, reported Thursday that Google had made a $10 billion bid for WhatsApp. Last year, the two tech giants reportedly made dueling bids of $3 billion or more for Snapchat, another popular messaging service.

"Zuckerberg and Facebook believe for many reasons that they needed to acquire this asset," Macquarie's Schachter said of WhatsApp, "and they paid a steep price that was necessary to get the deal done."

Still, if Zuckerberg is betting he can buy growth rather than innovate his way there, experts warn it can be a dangerous road: Just look at how Hewlett-Packard is still trying to dig out from some of the hefty acquisitions it's swung in recent years.

In fact, skeptics of the deal may note that Zuckerberg's "if they come, we will build it" attitude toward figuring out how to eventually monetize WhatsApp's traffic echoes many business plans from the dot-com era.

Ranah Edelin remembers that bubble all too well: He was vice president of pioneering online music site Listen.com, which raised $120 million in venture capital despite having no revenue. After the stock market collapsed in 2000, the company was sold for a reported $36 million.

Still, said Edelin, "It's different this time." Twitter and Facebook have proved it's possible to reap fortunes from vast troves of users, whether via advertising or other means. Edelin himself is CEO of an Instagram-like social network in San Francisco called We Heart It, which he said boasts 25 million users and adds a million more each month.

"If something has traction and is near and dear to a user's heart" Edelin said, "there are going to be a lot of creative ways to make money."

Contact Brandon Bailey at bbailey@mercurynews.com; follow him at Twitter.com/brandonbailey. Contact Peter Delevett at pdelevett@mercurynews.com; follow him at Twitter.com/mercwiretap.