http://www.businessinsider.com/facebook-messenger-whatsapp-usage-chart-2014-2
That's a lot of dineros
That's a lot of dineros
Facebook buys WhatsApp for 19 Billion. Billion with a B.
- Thread starter AlNipper49
- Start date
Granted, it's 300 million sets of eyeballs, but that's insane.
Worth noting that $12bn of that is in Facebook shares
Worth noting that $12bn of that is in Facebook shares
I feel like as one of the 300 million daily users, I deserve a cut.
Now if you excuse me, I'll be kidnapping Blacken and starting a social networking application. Are there ones that cater to specific demographics like dog lovers or guys with drinking problems that spend too much time on message boards?
Now if you excuse me, I'll be kidnapping Blacken and starting a social networking application. Are there ones that cater to specific demographics like dog lovers or guys with drinking problems that spend too much time on message boards?
things WhatsApp is worth more than
Dennis K. Berman @dkberman 2h
It's got 55 employees and was just bought for $19 billion. WhatsApp is now worth more than: Blackstone Group, Harley Davidson and The Gap.
https://twitter.com/dkberman/status/436264442893176834
Dennis K. Berman @dkberman 2h
It's got 55 employees and was just bought for $19 billion. WhatsApp is now worth more than: Blackstone Group, Harley Davidson and The Gap.
https://twitter.com/dkberman/status/436264442893176834
About $40 per current user. Still seems aggressive given their business model and the unclear synergies involved.
Facebook down about $4.5B in market cap in after hours trading FWIW, so the market reaction is less than thrilled. I'd have guessed it'd be down more honestly.
Monbo Jumbo said:
It's been about 14 years since AOL turned $150 billion of internet monopoly money into real money by acquiring/merging with Time Warner.
I still can't believe that happened.
Google apparently offered 10 billion for WhatsApp. Interested to know if they had any real intention of buying it, or just wanted to drive up the price for FB.
Seven Costanza said:
Which was a bit of a "bargain" given Google took a nearly $10 billion bath on that one. Hopefully Facebook isn't making the same mistake.
This sort of acquisition makes a lot more sense to me honestly (regardless of price). I see three pieces of value to Whatsapp - 1) monetizing it directly through ads/selling apps, whatever; 2) monetizing the user information, like who is talking to who, and about what; 3) trying to get Whatsapp users to use your other, non-competing services (in this case, Google+ or Facebook).Seven Costanza said:
It seems like #2 and #3 would have a lot more value to Google than to Facebook, since Facebook already has most of those users, and already knows an awful lot about what social networks people are in.
mt8thsw9th said:
They did no such thing. They paid $3.5 billion for Motorola's patent portfolio plus a 6% stake in Lenovo valued at $750million.
canderson said:
This article crunches the numbers and summarizes why Facebook had to have it:
It's an OS-agnostic iMessage app with ridiculous traction and growth. $16 billion was a bargain, and Google's $10 billion bid looks really cheap.
They'll make their money back double if they manage to keep those users in the Facebook ecosphere for an additional minute a day. *DukeSox said:
* numbers pulled from my ass
This is eerily reminiscent of 1999-2001. Paying for eyeballs has never proven to be a viable way to grow or create an internet business. The only difference now is that more of the world has computers/phones, so there are a lot more eyeballs to jack up the valuation. FB is already trading at about 30x sales. Which is ridiculous. To put this in perspective, if Google was trading at 30x sales, its shares would be valued at around $5400 and it would be the largest company in the world by about a $1T.
For Facebook to even get to that point on this deal, WhatsApp has to see 2900% revenue growth in the next 12 months, or directly attribute about $600M in revenue growth to this acquisition. They bought a company with $20 million in revenue for $19 billion. Typically, that's not a very good move.
For Facebook to even get to that point on this deal, WhatsApp has to see 2900% revenue growth in the next 12 months, or directly attribute about $600M in revenue growth to this acquisition. They bought a company with $20 million in revenue for $19 billion. Typically, that's not a very good move.
It just doesn't seem like there are very strong network effects here either. Unlike something like Twitter, LinkedIn, or Facebook, it's not a major hassle to switch messaging apps. If Whatsapp has a misstep, it's not a big deal to get my personal group of people I message to switch to another app. If Facebook does that, then you need a much larger migration for a competing service to get much traction.
In other words, the network effects from Twitter come largely from the fact that strangers use it too. That's not the case with Whatsapp. That seems much a much weaker "glue".
In other words, the network effects from Twitter come largely from the fact that strangers use it too. That's not the case with Whatsapp. That seems much a much weaker "glue".
M
MentalDisabldLst
Guest
The real value here is in the non-overlapping nature of the user bases between Facebook and WhatsApp, the latter is really big in developing countries, India, africa, other big parts of asia. Facebook is acquiring a platform that is big enough, and orthogonal enough to their own existing network effects, that it could one day challenge them if they didn't buy it. The same is kinda true of Snapchat, but only if Snapchat truly owns the current teenage market and they entirely ignore facebook once they go to college - by that measure, Snapchat deserves a big offer but is less likely to be an existential threat.
As for monetization, the $1 / year / user just for messaging fees is a baseline, add whatever Facebook is seeing for CPMs in each of the primary membership countries, and cross-sell opportunities to the main Facebook platform (e.g. apps one day), it makes a lot of sense to me.
As for monetization, the $1 / year / user just for messaging fees is a baseline, add whatever Facebook is seeing for CPMs in each of the primary membership countries, and cross-sell opportunities to the main Facebook platform (e.g. apps one day), it makes a lot of sense to me.
Chuck Z said:
I think that the mistake that they made was that the 'innovators' believed that eyeballs in themselves were a means to an end. The key is to attract eyeballs to something that eyeballs want to stick with. As MDL said below, if those eyeball in this case include untapped markets for a product that they've been underexposed to, then it'll work out just fine for Mark and crew.
It's weird saying that anyone is underexposed to facebook.
I think this is a great question. Probably will also be interesting to see if people were using an app like this because it WASN'T owned by a Facebook or Google. I disagree with the notion above that network affects don't matter -- getting all of the people onto a new messaging platform strikes me as something that isn't easy unless you're apple and bake it right in -- but I do think that this particular application's appeal had something to do with the fact that it wasn't connected to these other platforms. It was dead simple, used a phone number, didn't require a bunch of accounts, and didn't try to be more than it was. If FB buys it and messes with it at all, I could imagine user defection issues.jayhoz said:
I hate that it uses a phone number personally. It makes it device-dependent which sucks.
Unless I'm doing it wrong...
Unless I'm doing it wrong...
AlNipper49 said:
If this is the case, and I'm not saying it isn't, the real question then is how quickly can they turn this into actual revenue. I don't know what an appropriate discount rate would be using a WACC model going forward, but if that revenue isn't showing up for 1-2 years, then they need to generate even more in order to make the deal make sense.
Beyond that, you then get into the issue of how much advertising revenue you can actually expect from those countries on a per user basis going forward. Think about this in terms of drug companies. The same drug from Pfizer can be sold for $100 a pill in the US, but only $5 a pill in Africa. Because of the specific targeted nature of Facebook advertising, it starts to break down to more of a local model as well. So it's reasonable that a user in India isn't going to generate the same revenue as a user in the US, simply because companies won't pay as much for those ads since the sales from them won't be there.
I don't doubt that on some level this acquisition makes sense. The question is whether or not the price makes sense, and I have serious doubts as to whether it does.
I think this makes a good deal of sense:
He basically concludes that this is a means to get more users onto Facebook, where the market has valued users at $130 apiece, meaning it would take ~145 million marginal facebook users to pay for this.
M
MentalDisabldLst
Guest
Anyone still confused over Facebook's valuation of WhatsApp, or their $2Bn acquisition of Oculus Virtual Reality?
Marc Andreessen clarifies how the M&A logic works at tech companies in a series of tweets:
1/Second thing often misunderstood about tech valuations: How M&A acquirers decide how much $ to pay for companies they buy.
2/The key: Value of a tech company to public or private markets may be completely unrelated to value of same co to a corporate acquirer.
3/Value of company X to acquirer Y often = Potential impact to acquirer Y's business -- which has a lot more to do with Y than X.
4/For example, in product businesses, you'll often hear term "attach rate" -- acquirer Y can attach company X's product to Y's sales engine.
5/Ex: I sell $20B of servers/year; I buy storage company X doing $100M revenue/year; & I can attach X's product to 20% of my server sales.
6/Ex cont'd: I can generate new $20B*20% = $4B/year of storage sales attached to my server business. X's standalone revenue is irrelevant.
7/Ex cont'd: So I can pay up for storage company X based on its projected impact on MY business, way beyond X's independent valuation.
8/Of course, for the deal to be good, I have to deliver that attach rate. But when it works, and it often does, it's magical & worth doing.
9/This is literal meaning of attach rate, but there are others -- such as, maybe I know how to better monetize something I buy than they do.
10/Large $ acquisitions of small co's that seem irrational to outsiders almost always have a rigorous plan like this within the acquirer.
11/It's just nearly impossible to see from the outside, which is why many outsiders get so confused and upset at the time of acquisition.
12/But on the other hand, we do not consider it safe for a tech startup to have a plan that DEPENDS on a large acquirer applying this logic.
13/We only invest in startups that have a plan to be large independent dominant companies on their own, with great businesses in long term.
14/And the act of building for long-term independence makes you more attractive to potential acquirers, not less. So you can win both ways.
---
Figured someone here would appreciate that point of view.
Marc Andreessen clarifies how the M&A logic works at tech companies in a series of tweets:
1/Second thing often misunderstood about tech valuations: How M&A acquirers decide how much $ to pay for companies they buy.
2/The key: Value of a tech company to public or private markets may be completely unrelated to value of same co to a corporate acquirer.
3/Value of company X to acquirer Y often = Potential impact to acquirer Y's business -- which has a lot more to do with Y than X.
4/For example, in product businesses, you'll often hear term "attach rate" -- acquirer Y can attach company X's product to Y's sales engine.
5/Ex: I sell $20B of servers/year; I buy storage company X doing $100M revenue/year; & I can attach X's product to 20% of my server sales.
6/Ex cont'd: I can generate new $20B*20% = $4B/year of storage sales attached to my server business. X's standalone revenue is irrelevant.
7/Ex cont'd: So I can pay up for storage company X based on its projected impact on MY business, way beyond X's independent valuation.
8/Of course, for the deal to be good, I have to deliver that attach rate. But when it works, and it often does, it's magical & worth doing.
9/This is literal meaning of attach rate, but there are others -- such as, maybe I know how to better monetize something I buy than they do.
10/Large $ acquisitions of small co's that seem irrational to outsiders almost always have a rigorous plan like this within the acquirer.
11/It's just nearly impossible to see from the outside, which is why many outsiders get so confused and upset at the time of acquisition.
12/But on the other hand, we do not consider it safe for a tech startup to have a plan that DEPENDS on a large acquirer applying this logic.
13/We only invest in startups that have a plan to be large independent dominant companies on their own, with great businesses in long term.
14/And the act of building for long-term independence makes you more attractive to potential acquirers, not less. So you can win both ways.
---
Figured someone here would appreciate that point of view.
