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(BGR)   Google executive bashes the "exorbitant" $19 billion price Facebook paid for Whatsapp pointing out it amounts to about $500 mil per employee. Now the $10 billion or $250 mil per employee Google offered? Totally reasonable, apparently   (bgr.com ) divider line
    More: Dumbass, Google Offers, Facebook  
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518 clicks; posted to Business » on 06 Mar 2014 at 1:15 PM (2 years ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



25 Comments     (+0 »)
 
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2014-03-06 01:17:16 PM  
creatin' jobs in 'merica.


Ain't freedom great!
 
2014-03-06 01:43:05 PM  
Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.
 
2014-03-06 01:47:52 PM  
Facebook paid 19 billion for Whatsapp! I just downloaded it for free.
 
2014-03-06 01:48:14 PM  

FormlessOne: Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.


Which I assumed was what Facebook was doing as most analysts were stumped as to what about Whatsapp made them worth even 1/100th of the price FB paid.   But Google is know for being a cautious spender, and if they indeed made a $10 billion offer, as a companion article confirms, then there must be SOMETHING about whatsapp that is not immediately obvious but extremely valuable
 
2014-03-06 01:57:38 PM  

Magorn: FormlessOne: Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.

Which I assumed was what Facebook was doing as most analysts were stumped as to what about Whatsapp made them worth even 1/100th of the price FB paid.   But Google is know for being a cautious spender, and if they indeed made a $10 billion offer, as a companion article confirms, then there must be SOMETHING about whatsapp that is not immediately obvious but extremely valuable


User base in markets they want to expand into would be the only thing I see. With 200M users, let's say perhaps half of them don't have a Facebook account yet, but could. So they perhaps add 100M users. Let's say over the life of what's app the user base doubles, so the acquisition adds a total of 200M more people to FB that wouldn't otherwise sign up.

Facebook nets about $4/user/year, so 200M people would add about $800M in profit each year. So it would take roughly 10 years before this turns into profit for Facebook. Of course if they can haul in 400M new users, that cuts it down to 5 years to profitability, and if they can up their profit per user to $6/user it'd be a profitable acquisition in 4 years.

So it's maybe not totally crazy, but they're going to really have to play their cards right and commit to the long haul. Well, maybe 4 years isn't a long horizon, but for tech companies that seems like it can be forever...

That's about the only justification I can make of it though. It honestly feels like a crazy deal even at Google's offering price.
 
2014-03-06 01:59:35 PM  

Magorn: FormlessOne: Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.

Which I assumed was what Facebook was doing as most analysts were stumped as to what about Whatsapp made them worth even 1/100th of the price FB paid.   But Google is know for being a cautious spender, and if they indeed made a $10 billion offer, as a companion article confirms, then there must be SOMETHING about whatsapp that is not immediately obvious but extremely valuable


Existing user base in multiple countries that agreed to almost inexistent privacy terms.
 
2014-03-06 02:03:38 PM  
Hell, for $19 billion they could have bought the Ukraine.
 
2014-03-06 02:08:20 PM  
Its pocket change for Google.
Whereas for FB, that pocket is the size of a tent.
 
2014-03-06 02:09:50 PM  
Google had apparently offered to beat Facebook's price, but the deal fell through when Google refused to give up a board seat. http://www.telegraph.co.uk/technology/google/10653229/WhatsApp-turned- down-Google-in-favour-of-Facebook.html
 
2014-03-06 02:10:43 PM  
$5 for Totalfark is too much.
 
2014-03-06 02:15:54 PM  

Magorn: But Google is know for being a cautious spender


The company that paid $12.5 billion for Motorola, paid $3.2 billion for Nest, bought 8 robotics companies in the last couple of years, and is developing self-driving cars and contact lenses is known for being a cautious spender?  On what planet?

/at least with Nest they got some talent and at least one profitable product line
 
2014-03-06 02:19:49 PM  
How much is that in Bitcoins?
 
2014-03-06 02:36:20 PM  

BalugaJoe: $5 for Totalfark is too much.


when they pay me, i usually just give them a timeout
 
2014-03-06 02:42:27 PM  

FormlessOne: Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.


Along those lines, I think it's an issue of how much was paid for what was gained. The price for future buyouts keep growing because of this.

Only a few active players are able to compete and the competition will dwindle.

Basically it's Google, Facebook, and sort of Microsoft.

Apple doesn't seem interested in the social space and no one else can pay to play now.
 
2014-03-06 02:51:18 PM  

gingerjet: Magorn: But Google is know for being a cautious spender

The company that paid $12.5 billion for Motorola, paid $3.2 billion for Nest, bought 8 robotics companies in the last couple of years, and is developing self-driving cars and contact lenses is known for being a cautious spender?  On what planet?

/at least with Nest they got some talent and at least one profitable product line


Goggle mad a profit on Motorola, even though it doesn't seem so when you just look at purchase price and sale price.   and they weren't even buying Motorola for it's tech or even it's phone making business; those were just nice bonuses for Google.  Motorola got bought because it was a 70-year old tech company with a patent portfolio that included a lot of patents on very basic wireless computing and phone technologies.   After the "Rockstar consortium" of apple and Microsoft and Oracle bought a huge portfolio of patents from Nortel as it went out of business and promptly started suing Android Phone makers with them, Google needed a defensive counter-portfolio that they could license to Android phone makers so they could threaten to counter-sue and force apple MS etc to settle those cases.   That was the real thing Google was buying.  The MotoX etc were just because they could
 
2014-03-06 03:02:58 PM  

FormlessOne: Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.


Dear google,

I've developed a super securt search algorithm that will put you out of business. I would reluctantly accept $500 million and you may buy me out.

kthanks

These things seem to be all about eyeballs. I wondered at what seemed like the huge cost that google spent on youtube when they already had their own video sharing site. 1.7 billion seems like a lot of advertising to push people to your site. That said, tech users seem resistant to that kind of stuff and really hate switching networks.
 
2014-03-06 04:28:47 PM  

error 303: Magorn: FormlessOne: Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.

Which I assumed was what Facebook was doing as most analysts were stumped as to what about Whatsapp made them worth even 1/100th of the price FB paid.   But Google is know for being a cautious spender, and if they indeed made a $10 billion offer, as a companion article confirms, then there must be SOMETHING about whatsapp that is not immediately obvious but extremely valuable

User base in markets they want to expand into would be the only thing I see. With 200M users, let's say perhaps half of them don't have a Facebook account yet, but could. So they perhaps add 100M users. Let's say over the life of what's app the user base doubles, so the acquisition adds a total of 200M more people to FB that wouldn't otherwise sign up.

Facebook nets about $4/user/year, so 200M people would add about $800M in profit each year. So it would take roughly 10 years before this turns into profit for Facebook. Of course if they can haul in 400M new users, that cuts it down to 5 years to profitability, and if they can up their profit per user to $6/user it'd be a profitable acquisition in 4 years.

So it's maybe not totally crazy, but they're going to really have to play their cards right and commit to the long haul. Well, maybe 4 years isn't a long horizon, but for tech companies that seems like it can be forever...

That's about the only justification I can make of it though. It honestly feels like a crazy deal even at Google's offering price.


well considering that Whatsapp has 450 mil users and increasing 1 mil a day....
 
2014-03-06 04:43:13 PM  

mr lawson: well considering that Whatsapp has 450 mil users and increasing 1 mil a day....


Yeah, it's a big user base and my understanding is that a lot of it is in other countries that haven't embraced Facebook like the US and other western countries have. So if they can pull much of that user base into the Facebook family or monetize Whatsapp to the same extent they have Facebook, I could see the investment paying off in maybe half a decade.  I dunno though, I'm not any sort of tech savvy business person. Surficially it still seems like a huge amount of money for something that may or may not work, but I don't think Facebooks business people all got drunk one day and just spat out a number. There's a lot of value in the data of a huge user base, and only a finite number of people on the planet...
 
2014-03-06 06:24:09 PM  
Pay $19 for something worth $10 is a bad deal.  Paying $19 billion for something worth $10 billion is an even worse deal.  Clearly, Google thinks Whats App was worth $10 billion but not $19 billion.
 
2014-03-06 07:27:47 PM  

kbronsito: Facebook paid 19 billion for Whatsapp! I just downloaded it for free.


I don't even need it. My flip phone already sends texts and pictures.
 
2014-03-06 08:24:46 PM  

FormlessOne: Yeah, but it's not about the "amount per employee," but the "amount for IP" that drives the price. Cheaper to buy them out than to compete with them.


Although "buying out the competition at a massive loss" is a risky long term strategy when potential competitors are coming out of the woodwork all the time with low startup costs.
 
2014-03-06 08:49:44 PM  

Target Builder: Although "buying out the competition at a massive loss" is a risky long term strategy when potential competitors are coming out of the woodwork all the time with low startup costs.


So much this. "Buy them up, shut them down" really only works in business with a high barrier to entry.
 
2014-03-06 09:47:19 PM  
Facebook and Google are both morons for even considering this.

Whatsapp doesn't have any patents. It is just a flipping App that is barely monetized ($1/year). And their users did not sign up for ads, so good luck introducing them. In addition, there are tons of SMS-like apps that provide a similar service, so there are competitive options in the market.

And most important, the key function of Whatsapp is being obliterated right now. People use it for the 'free' global SMS. Right now the world's wireless companies are rolling out Free Global SMS, but pushing fees up on data. So the economic niche of this type of apps is going to be gone soon.

So congratulation Facebook for setting fire to $17B. That makes the near blunder that Google dodged by not buying Groupon look like peanuts.
 
2014-03-07 03:54:30 AM  
I'm only 31 and have NO idea what this thing is.

I think I'm happy about that.
 
2014-03-07 09:04:37 AM  

czetie: Target Builder: Although "buying out the competition at a massive loss" is a risky long term strategy when potential competitors are coming out of the woodwork all the time with low startup costs.

So much this. "Buy them up, shut them down" really only works in business with a high barrier to entry.


Hey, it works for Insight.

/fark that place
 
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