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Facebook buys whatsapp for $16B


gjangal

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That's right. Facebook is an advertising company. They pay for eyeballs and nothing else. This deal is no different.

 

this is the problem. they were both the "hot" messaging platforms at one point. now they are nothing. messaging is so reliant on a fickle audience and is subject to rapidly changing technologies. this whatsapp deal is one of the crazier things I've seen even by dot com bubble standards. it's actually a $19b deal. because fb had to give whatsapp employees $3b incentive to stay.

 

I have the same gut reaction, but just to play devil's advocate, how many Whatsapp users are non-FB users currently, and how many will become FB users after the acquisition? That's worth something.

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I am from India too and use whatsapp extensively. Like earlier used yahoo messanger, msn messanger, sms, bbm etc :)

 

Now just a thought - what if someone like Google launches a clone of whatsapp, with the promotion that they will pay 100 most prolific users over a year 10 million dollar each or 1000 users a million dollar each (total cost 1 billion only:) ), whats gonna happen to whatsapp base - i think it will be a mass shift, right ?

 

Doesn't seem to meet 'Buffett test of competitor with a billion dollar to burn' test....         

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I am from India too and use whatsapp extensively. Like earlier used yahoo messanger, msn messanger, sms, bbm etc :)

 

Now just a thought - what if someone like Google launches a clone of whatsapp, with the promotion that they will pay 100 most prolific users over a year 10 million dollar each or 1000 users a million dollar each (total cost 1 billion only:) ), whats gonna happen to whatsapp base - i think it will be a mass shift, right ?

 

Doesn't seem to meet 'Buffett test of competitor with a billion dollar to burn' test....       

 

Good idea.

 

Or what happens when major telecom companies introduce a more functional message format and lower their prices? They make billions of profit from text messages - they have the most incentive to compete and stop the growth of proprietary alternative message services.

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good points, but how do you compete with $1/yr or $2 or $3/yr ?

 

more functionality? i would think whatsapp has the edge in that, their foundation is base of the internet, much more flexible than some sms network/system.

 

hy

 

I am from India too and use whatsapp extensively. Like earlier used yahoo messanger, msn messanger, sms, bbm etc :)

 

Now just a thought - what if someone like Google launches a clone of whatsapp, with the promotion that they will pay 100 most prolific users over a year 10 million dollar each or 1000 users a million dollar each (total cost 1 billion only:) ), whats gonna happen to whatsapp base - i think it will be a mass shift, right ?

 

Doesn't seem to meet 'Buffett test of competitor with a billion dollar to burn' test....       

 

Good idea.

 

Or what happens when major telecom companies introduce a more functional message format and lower their prices? They make billions of profit from text messages - they have the most incentive to compete and stop the growth of proprietary alternative message services.

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Guest wellmont

wireless providers will slowly raise prices on data as people migrate off text plans. this is their strategy. you won't even notice. :)

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wellmont you are probably right, but this is much bigger issue/problem not just for whatsapp, its the entire industry, this will affect everyone and many people with deep pockets are fighting it.

 

hy

 

wireless providers will slowly raise prices on data as people migrate off text plans. this is their strategy. you won't even notice. :)

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I've been using WhatsApp for a while now.  Primarily because a family member didn't want to pay for text messaging on AT&T, but I actually like the app.

 

It'll be interesting to see how Zuck tries to justify the purchase price.  Even assuming that the stock currency is actually worth a fraction of the nominal market value, FB still paid out $4 billion in cash. 

 

Amazing.

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LINE is ten time better than WhatsApp ,IMO.

 

I'm based in Thailand .Almost everyone used WhatsApp until 2 years ago when Line came.  Free to use and group chat with maximum of 100 people . It is not just a messaging ,it is more like social network app. Line Flash Deal , Line Games , Line Camera.  It has 350 million users and making $100 million/ quarter. 

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LINE is ten time better than WhatsApp ,IMO.

 

I'm based in Thailand .Almost everyone used WhatsApp until 2 years ago when Line came.  Free to use and group chat with maximum of 100 people . It is not just a messaging ,it is more like social network app. Line Flash Deal , Line Games , Line Camera.  It has 350 million users and making $100 million/ quarter.

 

So do you think FB will turn WhatsApp into a Line-like app?

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Interestingly, if you play around with the IV of FB stock, then you can get to a price per user that's similar to the Skype acquisition, which was done all in cash and was apparently around $14.70 per active user.

 

For example, let's say that FB stock is really worth $0.25 on the dollar.  The potential $15 billion in stock is then really worth only $3.75 billion in IV.  That comes out to $7.75 billion of IV ($3.75 billion stock, $4 billion cash), which is around $17.22 per active user.  If there is an immediate bump in WhatsApp active user usage and WhatsApp's users are sticky (a big assumption), then the price per active user will go down immediately. 

 

This is clearly a defensive acquisition, just as MSFT's buy of Skype was defensive.  I've not done any real analysis of FB, but apparently FB is on a run rate to generate after-tax income of over $2 billion annually.  I suppose it's possible that FB has determined behind the scenes that the existential threat from messaging apps is enough to threaten at least $7.75 billion (NPV) of economic profits. 

 

Imagine, for example, if BBRY at close to its peak market cap of around $70 billion, had diluted its shareholders to buy Lenovo or Foxconn.  BBRY could very well have avoided being a cigar butt trading at a sub-$5 billion market cap.  Maybe.

 

Anyways, I think the main conclusion to draw from this deal is that FB stock is likely waaaaaaay overvalued.

 

 

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LINE is ten time better than WhatsApp ,IMO.

 

I'm based in Thailand .Almost everyone used WhatsApp until 2 years ago when Line came.  Free to use and group chat with maximum of 100 people . It is not just a messaging ,it is more like social network app. Line Flash Deal , Line Games , Line Camera.  It has 350 million users and making $100 million/ quarter.

 

So do you think FB will turn WhatsApp into a Line-like app?

Mark said he won't change WhatsApp.  But if he want WhatsApp to compete with WeChat or Line ,he has to change it big time.Better to buy Naver Corp ,owner of Line, in Korean market which is valued at $16-17 Billion

 

 

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To follow the line of reasoning expressed earlier in this thread, I wonder what this says about Google. They also offered 10B for this, they offered 3B for Snapchat, and they're paying 3B for Nest....Maybe they're seeing weaknesses in their business model that the market is not?

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Ditched WhatsApp.  Started using Telegram.  It's pretty awesome.

 

Telegram had a massive spike in popularity that seemed to coincide with the WhatsApp acquisition and then the outage that they had. Good for them to capitalize on it.

 

I've been wanting to try LINE, which is very popular in Japan and part of Asia. They seem to have an interesting model. I'll have to check out Telegram too.

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Ditched WhatsApp.  Started using Telegram.  It's pretty awesome.

 

Telegram had a massive spike in popularity that seemed to coincide with the WhatsApp acquisition and then the outage that they had. Good for them to capitalize on it.

 

I've been wanting to try LINE, which is very popular in Japan and part of Asia. They seem to have an interesting model. I'll have to check out Telegram too.

 

I tried LINE.  I'm not into the whole in your face monetization strategy they have.  It's also too cutesy-kawaii for me -- must be an East Asian thing (jk, jk).

 

Telegram is supposedly a non-profit venture.  It's really fast, and it has encrypted "secret chat" functionality as well that uses RSA public key encryption.  They're based in Berlin, which means that they are likely very, very privacy aware.  In fact, if their servers are in Germany, they are likely subject to Germany's very strong data protection authority.

 

The logo is also pretty sweet.

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Ditched WhatsApp.  Started using Telegram.  It's pretty awesome.

 

Telegram had a massive spike in popularity that seemed to coincide with the WhatsApp acquisition and then the outage that they had. Good for them to capitalize on it.

 

I've been wanting to try LINE, which is very popular in Japan and part of Asia. They seem to have an interesting model. I'll have to check out Telegram too.

 

I tried LINE.  I'm not into the whole in your face monetization strategy they have.  It's also too cutesy-kawaii for me -- must be an East Asian thing (jk, jk).

 

Telegram is supposedly a non-profit venture.  It's really fast, and it has encrypted "secret chat" functionality as well that uses RSA public key encryption.  They're based in Berlin, which means that they are likely very, very privacy aware.  In fact, if their servers are in Germany, they are likely subject to Germany's very strong data protection authority.

 

The logo is also pretty sweet.

 

Although there appears to be some dispute as to the "secure" nature of their "secret chat" option.  Would be interested to hear from anybody on the board who has more knowledge about crypto and the way these guys have implemented their supposedly secure solution.

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I wish Apple would just make iMessage cross-platform.

 

I don't think they'll ever do that. No reason for them. People can install any other messaging app on their device if they want to, so it's not like the iPhone is a walled garden, but iMessage must stay something that adds value for the iOS/OSX ecosystem, and that stops being the case if it's multi-platform.

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Guest wellmont

I wish Apple would just make iMessage cross-platform.

 

I don't think they'll ever do that. No reason for them. People can install any other messaging app on their device if they want to, so it's not like the iPhone is a walled garden, but iMessage must stay something that adds value for the iOS/OSX ecosystem, and that stops being the case if it's multi-platform.

 

and on that Thorsten Heins and Apple are in complete agreement.  ;)

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and on that Thorsten Heins and Apple are in complete agreement.  ;)

 

That's true, but everything else is different.

 

Blackberry was a failing company and one of the only things left with value was BBM, so trying to grow BBM even at the expense of the devices might have been smart. But why would Apple grow iMessage at the expense of its devices where they make money?

 

Apple would gain nothing by giving iMessage to android users. It wouldn't sell more iPhone, in fact it might mean fewer sales. The iPhone already has all of Android's messaging apps (none of import are android only), but android doesn't have iMessage. It's one more reason to get an iPhone.

 

It's not like Apple will ever monetize iMessage directly with ads. Its value is in selling hardware, just like iOS (unless you think Apple should also license iOS to other companies - another thing they'll never do).

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