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(Business Insider)   Facebook buying messaging app maker Whatsapp for $18 billion, which works out to about $360 million per Whatsapp employee, or $28 per user of an app that doesn't sell advertising and costs $1/year to use   (businessinsider.com) divider line 36
    More: Strange, WhatsApp, Facebook, Facebook buying, restricted stock  
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567 clicks; posted to Business » on 20 Feb 2014 at 11:24 AM (22 weeks ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



36 Comments   (+0 »)
   
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2014-02-20 11:33:03 AM
Guess what access restrictions are going to change.
 
2014-02-20 11:40:55 AM
So in 30 years they'll have made a profit!  That's totally rational business decision and not at all another example of Facebook using its huge piggy bank from its own ridiculously overvalued IPO to buy out all potential competitors before they have a chance to get started!

Still good on the founder who started out in a hut in Russia with no running water or electricity and is now worth six Billion bucks.....
 
2014-02-20 11:48:43 AM
Faux SMS services are a dime a dozen. Paying a billion for one, even a big one, would be crazy. $18B makes Googles refused offer for Groupon look like a great value. It appears that FB has lottery winning syndrome. I'm glad I don't own any of their shares - underwriting this stupidity.
 
2014-02-20 11:49:51 AM

Magorn: So in 30 years they'll have made a profit! That's totally rational business decision and not at all another example of Facebook using its huge piggy bank from its own ridiculously overvalued IPO to buy out all potential competitors before they have a chance to get started!


I'm thinking buying an app for $18 billion means the potential competitor "had a chance to get started."  I'm also thinking Zuckerberg/Facebook have a plan to make profit off of this in a variety of manners other than charging users and advertisements.  Just because you can't think of a way doesn't mean they don't exist.
 
2014-02-20 11:51:45 AM
Mark, I have an empty box I will let you have for $10,000,000.

If you wait until tomorrow, the price will be $12,000,000.
 
2014-02-20 11:52:26 AM
Obvious tech bubble is obvious.
 
2014-02-20 11:52:33 AM
Ars Technica has a story on WhatsApp up right now. Here's the creator's philosophy on the app:

He had just three rules as he experimented with the early iterations: his service would defiantly not carry advertising, an experience satisfyingly absent from his Soviet upbringing; it would not store messages and thus imperil individual citizens' privacy; and it would maintain a relentless focus on delivering a gimmickless, reliable, friction-free user experience.

Anyone want to take bets on the first three things that'll change when FB takes over?
 
2014-02-20 11:54:57 AM
By this logic, Fark is work 3 Trillion dollars.
 
2014-02-20 12:02:37 PM

BalugaJoe: By this logic, Fark is work 3 Trillion dollars.


It's only worth 10 cents. The rest of the valuation is repeats and copy/pasta.

The rest of the valuation is repeats and copy/pasta.
 
2014-02-20 12:09:47 PM

lennavan: Magorn: So in 30 years they'll have made a profit! That's totally rational business decision and not at all another example of Facebook using its huge piggy bank from its own ridiculously overvalued IPO to buy out all potential competitors before they have a chance to get started!

I'm thinking buying an app for $18 billion means the potential competitor "had a chance to get started."  I'm also thinking Zuckerberg/Facebook have a plan to make profit off of this in a variety of manners other than charging users and advertisements.  Just because you can't think of a way doesn't mean they don't exist.


Yes, this. An acquisition like this - $18 billion is roughly 10% of Facebook's market cap - was very carefully considered by a lot of smart people; Facebook clearly sees enormous potential. I can't figure out where or how, given that WhatsApp-type services are fairly common and the barrier to entry is low, but I don't sit on the Facebook board. I mostly wonder how they plan to retain the current user base and continue the kind of growth WhatsApp has seen if it becomes a paid (even at $1/year) or advertising-based service when there are so many other options available.

Consider that Viber - a WhatsApp style SMS system, roughly the same features, roughly the same number of users - was recently acquired by Rakuten for "only" $900m. Is there something about WhatsApp that makes it 20x more valuable than Viber, did Rakuten get a spectacular deal, or did Facebook get taken to the cleaners?
 
2014-02-20 12:11:06 PM
Well, I believe most of the deal was in Facebook stock, yes? So if it's a good idea for FB, the price will go up somewhat, and if its a bad move, the price will go down. Plus this may help funnel non-US folks into Facebook. Plus, it... I dunno. That's only about as far as I could justify this. It seems like an insane deal at a quarter of the price. The 450M userbase is absolutely the only thing that would be attractive to facebook, and I'm sure there's plenty of overlap there.
 
2014-02-20 12:15:44 PM

error 303: Well, I believe most of the deal was in Facebook stock, yes? So if it's a good idea for FB, the price will go up somewhat, and if its a bad move, the price will go down. Plus this may help funnel non-US folks into Facebook. Plus, it... I dunno. That's only about as far as I could justify this. It seems like an insane deal at a quarter of the price. The 450M userbase is absolutely the only thing that would be attractive to facebook, and I'm sure there's plenty of overlap there.


Facebook is either getting desperate or Zuckerberg is hitting the bottle.
 
2014-02-20 12:25:06 PM

qorkfiend: lennavan: Magorn: So in 30 years they'll have made a profit! That's totally rational business decision and not at all another example of Facebook using its huge piggy bank from its own ridiculously overvalued IPO to buy out all potential competitors before they have a chance to get started!

I'm thinking buying an app for $18 billion means the potential competitor "had a chance to get started."  I'm also thinking Zuckerberg/Facebook have a plan to make profit off of this in a variety of manners other than charging users and advertisements.  Just because you can't think of a way doesn't mean they don't exist.

Yes, this. An acquisition like this - $18 billion is roughly 10% of Facebook's market cap - was very carefully considered by a lot of smart people; Facebook clearly sees enormous potential. I can't figure out where or how, given that WhatsApp-type services are fairly common and the barrier to entry is low, but I don't sit on the Facebook board. I mostly wonder how they plan to retain the current user base and continue the kind of growth WhatsApp has seen if it becomes a paid (even at $1/year) or advertising-based service when there are so many other options available.

Consider that Viber - a WhatsApp style SMS system, roughly the same features, roughly the same number of users - was recently acquired by Rakuten for "only" $900m. Is there something about WhatsApp that makes it 20x more valuable than Viber, did Rakuten get a spectacular deal, or did Facebook get taken to the cleaners?


They are probably seeing the writing on the wall. Facebook won't be around forever unless it evolves along with it's users.


Still, F-me, 16 billion dollars for what is a relatively simple piece of software.
 
2014-02-20 12:27:42 PM

qorkfiend: Yes, this. An acquisition like this - $18 billion is roughly 10% of Facebook's market cap - was very carefully considered by a lot of smart people; Facebook clearly sees enormous potential. I can't figure out where or how, given that WhatsApp-type services are fairly common and the barrier to entry is low, but I don't sit on the Facebook board. I mostly wonder how they plan to retain the current user base and continue the kind of growth WhatsApp has seen if it becomes a paid (even at $1/year) or advertising-based service when there are so many other options available.


I think a large part of it has to be the value they think it will add to Facebook when they integrate it.  The barrier to entry for WhatsApp is low but Facebook is increasing the barrier to entry for Facebook competitors.

qorkfiend: Consider that Viber - a WhatsApp style SMS system, roughly the same features, roughly the same number of users - was recently acquired by Rakuten for "only" $900m. Is there something about WhatsApp that makes it 20x more valuable than Viber


Sure, it will be integrated with Facebook soon.  But as for right now, good question.  Farked if I know.  Maybe a patent?
 
2014-02-20 12:29:46 PM

Magorn: So in 30 years they'll have made a profit!  That's totally rational business decision and not at all another example of Facebook using its huge piggy bank from its own ridiculously overvalued IPO to buy out all potential competitors before they have a chance to get started!

Still good on the founder who started out in a hut in Russia with no running water or electricity and is now worth six Billion bucks.....


The service has 450 million users.  Just a few less then your mom has.
 
2014-02-20 12:41:00 PM

mcreadyblue: error 303: Well, I believe most of the deal was in Facebook stock, yes? So if it's a good idea for FB, the price will go up somewhat, and if its a bad move, the price will go down. Plus this may help funnel non-US folks into Facebook. Plus, it... I dunno. That's only about as far as I could justify this. It seems like an insane deal at a quarter of the price. The 450M userbase is absolutely the only thing that would be attractive to facebook, and I'm sure there's plenty of overlap there.

Facebook is either getting desperate or Zuckerberg is hitting the bottle.


I don't see why it can't be both?
 
2014-02-20 01:46:02 PM
Hmmmmmmm...
A subscription to whats app for a year.
Or a small frosty from Wendys.
tough choice.
 
2014-02-20 02:04:07 PM
It's $19 billion subby. What's funny is that Viber(300 million users) was brought for only $900 million the other day and people thought that was a bad idea.
 
2014-02-20 02:26:26 PM

lennavan: Magorn: So in 30 years they'll have made a profit! That's totally rational business decision and not at all another example of Facebook using its huge piggy bank from its own ridiculously overvalued IPO to buy out all potential competitors before they have a chance to get started!

I'm thinking buying an app for $18 billion means the potential competitor "had a chance to get started."  I'm also thinking Zuckerberg/Facebook have a plan to make profit off of this in a variety of manners other than charging users and advertisements.  Just because you can't think of a way doesn't mean they don't exist.


I imagine the reasoning it that the purchase has value in many ways to FB if they can pull it off - defensive acquisition in terms of acquiring effectively a "mobile FB" market that they haven't totally cracked themselves (and in many ways the mobile FB is more likely to dominate than something that is more PC based, given the usage patterns). The user base doesn't seem to have a huge amount of overlap with FB so in the medium term integration could boost both services numbers. In the medium term it also is probably part of a punt at the current online business "holy grail" - a global micropayment system entirely run by one company, so they can take a cut of every transaction - something that "everyone" has and uses regularly could work (I believe some of WhatApps competitors already include features along these lines).
 
2014-02-20 03:02:05 PM

stevenvictx: Hmmmmmmm...
A subscription to whats app for a year.
Or a small frosty from Wendys.
tough choice.


Around these parts, for $1 you can get a keytag from Wendy's which will let you have a free small frosty every time you go in for all of 2014.
 
2014-02-20 03:23:37 PM

lennavan: qorkfiend: Yes, this. An acquisition like this - $18 billion is roughly 10% of Facebook's market cap - was very carefully considered by a lot of smart people; Facebook clearly sees enormous potential. I can't figure out where or how, given that WhatsApp-type services are fairly common and the barrier to entry is low, but I don't sit on the Facebook board. I mostly wonder how they plan to retain the current user base and continue the kind of growth WhatsApp has seen if it becomes a paid (even at $1/year) or advertising-based service when there are so many other options available.

I think a large part of it has to be the value they think it will add to Facebook when they integrate it.  The barrier to entry for WhatsApp is low but Facebook is increasing the barrier to entry for Facebook competitors.

qorkfiend: Consider that Viber - a WhatsApp style SMS system, roughly the same features, roughly the same number of users - was recently acquired by Rakuten for "only" $900m. Is there something about WhatsApp that makes it 20x more valuable than Viber

Sure, it will be integrated with Facebook soon.  But as for right now, good question.  Farked if I know.  Maybe a patent?


That was my first thought.  Facebook wants to do something like WhatsApp but they have a patent.  Rather than messing around with licensing and development, they just bought the sucker.  Still a steep price to pay.
 
2014-02-20 03:52:09 PM
FTFA: On being acquired by a large company  (quoted before the Facebook acquisition) Jan Koum says: "We worked in a large company and we weren't that happy. Facebook Google, Apple, Yahoo-there's a common theme. None of these companies ever sold. By staying independent they were able to build a great company. That's how we think about it." Brian Acton adds: "I worry about what [an acquiring] company would do with our population: we've made such an important promise to our users-no ads, no gimmicks, no games-that to have someone come along and buy us seems awfully unethical. It goes against my personal integrity."

I'd also be willing to sell my personal integrity for $19B.
 
2014-02-20 04:15:27 PM

rugman11: lennavan: qorkfiend: Yes, this. An acquisition like this - $18 billion is roughly 10% of Facebook's market cap - was very carefully considered by a lot of smart people; Facebook clearly sees enormous potential. I can't figure out where or how, given that WhatsApp-type services are fairly common and the barrier to entry is low, but I don't sit on the Facebook board. I mostly wonder how they plan to retain the current user base and continue the kind of growth WhatsApp has seen if it becomes a paid (even at $1/year) or advertising-based service when there are so many other options available.

I think a large part of it has to be the value they think it will add to Facebook when they integrate it.  The barrier to entry for WhatsApp is low but Facebook is increasing the barrier to entry for Facebook competitors.

qorkfiend: Consider that Viber - a WhatsApp style SMS system, roughly the same features, roughly the same number of users - was recently acquired by Rakuten for "only" $900m. Is there something about WhatsApp that makes it 20x more valuable than Viber

Sure, it will be integrated with Facebook soon.  But as for right now, good question.  Farked if I know.  Maybe a patent?

That was my first thought.  Facebook wants to do something like WhatsApp but they have a patent.  Rather than messing around with licensing and development, they just bought the sucker.  Still a steep price to pay.


Nope. The deal doesn't include a patent portfolio, and WhatsApp has no patents issued by the US.
 
2014-02-20 04:33:11 PM

xria: lennavan: Magorn: So in 30 years they'll have made a profit! That's totally rational business decision and not at all another example of Facebook using its huge piggy bank from its own ridiculously overvalued IPO to buy out all potential competitors before they have a chance to get started!

I'm thinking buying an app for $18 billion means the potential competitor "had a chance to get started."  I'm also thinking Zuckerberg/Facebook have a plan to make profit off of this in a variety of manners other than charging users and advertisements.  Just because you can't think of a way doesn't mean they don't exist.

I imagine the reasoning it that the purchase has value in many ways to FB if they can pull it off - defensive acquisition in terms of acquiring effectively a "mobile FB" market that they haven't totally cracked themselves (and in many ways the mobile FB is more likely to dominate than something that is more PC based, given the usage patterns). The user base doesn't seem to have a huge amount of overlap with FB so in the medium term integration could boost both services numbers. In the medium term it also is probably part of a punt at the current online business "holy grail" - a global micropayment system entirely run by one company, so they can take a cut of every transaction - something that "everyone" has and uses regularly could work (I believe some of WhatApps competitors already include features along these lines).


I don't buy it. Who were they defending against? The only other players who have this type of cash sitting around (Apple, Google) definitely wouldn't put a $20b valuation on it. It'd be more like $3b.
 
2014-02-20 05:14:13 PM
To give a sense of scale, Sony's market cap is between $17-18B. So Facebook could have bought SONY instead. This purchase places the value of a simple app that has almost no revenue higher than a company that makes every form of electronics, movies, games, and music.
 
2014-02-20 05:33:50 PM
I can't help but think of Blackberry. BBM did/does everything Whatsapp can do and did it before Whatsapp, except Blackberry limited it only to Blackberry users and used a horrible pin system rather than the insanely obvious phone number.

Whatsapp sale price $18 billion. Blackberry market cap $4.7 billion.

Way to go Blackberry.
 
2014-02-20 05:52:02 PM
In case anyone hasn't noticed, Zuckerberg doesn't care much about shareholders. Or profit, for that matter.

And the way the share classes are structured, it is near impossible to oust him.

As for the price, perhaps it is a way to troll rivals. Will this cause Twitter/Google/Microsoft to buy Snapchat for a stupid amount of money? Perhaps.

Look at the stupidity In merger prices in the late 90s. Disney paid $20 billion for ABC, then Viacom paid $80 billion for CBS, Vivendi paid $10 billion for USA & SciFi, and AOL paid $160 billion for Time Warner.
 
2014-02-20 07:16:08 PM
Stock market 2000, part deux: Electric Boogaloo.
 
2014-02-20 07:19:33 PM
I will never sell the land.
 
2014-02-20 07:57:33 PM

madgonad: To give a sense of scale, Sony's market cap is between $17-18B. So Facebook could have bought SONY instead. This purchase places the value of a simple app that has almost no revenue higher than a company that makes every form of electronics, movies, games, and music.


This is proof positive that I will never understand economics.
 
2014-02-20 09:13:06 PM

madgonad: To give a sense of scale, Sony's market cap is between $17-18B. So Facebook could have bought SONY instead. This purchase places the value of a simple app that has almost no revenue higher than a company that makes every form of electronics, movies, games, and music.


Sony's business also has little to do with Facebook's strategy.

Sony's value suffers from a conglomerate discount: the firm is worth more if it was split up.

everything Sony is best known for internationally contributes little to profit. Life insurance and banking in Japan has made up HALF of Sony's global earnings for several years.
 
2014-02-20 09:59:17 PM

dumbobruni: In case anyone hasn't noticed, Zuckerberg doesn't care much about shareholders. Or profit, for that matter.

And the way the share classes are structured, it is near impossible to oust him.


I'm pretty sure Zuckerberg has very little influence on the overall strategy of Facebook at this point.  He's made his billions and gets a nice title, but a board of directors now runs the show and calls the shots.
 
2014-02-20 10:41:43 PM

valkore: dumbobruni: In case anyone hasn't noticed, Zuckerberg doesn't care much about shareholders. Or profit, for that matter.

And the way the share classes are structured, it is near impossible to oust him.

I'm pretty sure Zuckerberg has very little influence on the overall strategy of Facebook at this point.  He's made his billions and gets a nice title, but a board of directors now runs the show and calls the shots.


The class of shares that Zuckerberg primarily owns have something like 10X the voting power of the IPO'd share class.  He controls facebook.
 
2014-02-21 01:07:49 AM
Screw the app. They just locked up an engineering team for at least two years and secured 450 million user accounts.
 
2014-02-21 04:24:24 AM
Facebook and WhatsApp will both be worthless in 10 years, not just people of natural drift, but because mobile operating systems are increasinging cannibalising their functionality as built-in features.

It's already happening with the People app social network consolidation feature on Windows Phone.
 
2014-02-21 01:05:24 PM

dumbobruni: madgonad: To give a sense of scale, Sony's market cap is between $17-18B. So Facebook could have bought SONY instead. This purchase places the value of a simple app that has almost no revenue higher than a company that makes every form of electronics, movies, games, and music.

Sony's business also has little to do with Facebook's strategy.

Sony's value suffers from a conglomerate discount: the firm is worth more if it was split up.

everything Sony is best known for internationally contributes little to profit. Life insurance and banking in Japan has made up HALF of Sony's global earnings for several years.


Sounds like they are becoming GE.  GE's main source of income is their various banking, insurance, and other financial divisions as opposed to making things that are Generally Electric.
 
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