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Immigrant sells WhatsApp to Facebook for $19bn

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Jan Koum, a Ukrainian who settled in the US, has sold his WhatsApp mobile app to Facebook for $19bn. Mr Koum, 37, left Ukraine for the US when with his mother he was 16. His story is a classic 'rags-to-riches' American dream, immigrant tale.

Koum and his mother, both Jewish, left Ukraine in 1993 because of anti-Semitism. When they arrived in California in 1993, they were so poor that they relied on government hand-outs and 'food stamps' for survival. He taught himself computer programming using cheap, second-hand books.

After leaving university, he worked for ten years at Yahoo! before setting up WhatsApp with his business partner Brian Acton who had worked with him at Yahoo! and had looked after him after his mother died in 2000.

450m WhatsApp users

WhatsApp is a smart phone app which enables people who download it to send free text messages. The app is free for a year and costs $1 a year thereafter. It was a founding principle of the company that it would be free to use and it would not be funded by advertising. It currently has 450m users.

Some have questioned the business sense of paying so much for WhatsApp. The Economist magazine says that it is part of an ongoing 'turf war' between the tech industry giants; companies like Google, Amazon, Apple, Microsoft and Facebook. Viber, an app which provides a similar service was bought by Japanese internet company Rakuten recently for only $900m. Viber has 290m users.

Mark Zuckerberg, the founder and chief executive of Facebook, said that the deal made sense because WhatsApp is the fastest growing texting app. It has 450m users, most of whom use the service every day.

App firms' value rising

The purchase also comes, The Economist says, at a time when the net worth of app companies is rising steeply. WhatsApp is not only growing rapidly, it is also very cheap to run. It has 450m customers and only 32 software engineers; or one for every 14m users.

Facebook paid $4bn in cash, $12bn in Facebook shares with a further $3bn in Facebook shares for WhatsApp staff (including Mr Koum) in three years. Mr Koum is thought to own 45% of the company and so is now worth in the region of $6bn.

Mr Koum has clearly not forgotten his humble beginnings in the US. He signed the deal with Facebook at a former Social Services building, now closed, where he once went to get his food stamps.

WhatsApp will operate independently

Mr Koum wrote about the deal on his blog on 20th February. He said 'WhatsApp will remain autonomous and operate independently.

'You can continue to enjoy the service for a nominal fee…and you can still count on absolutely no ads interrupting your communication. There would have been no partnership between our two companies if we had to compromise'.

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