This morning, was thinking Startups, worth and acquisition.
At the end this question came to my mind of which I planned bringing it here before seeing something similar on Quora.
How possibly can they get back the $19B in let’s say 5-10 years considering whatsapps is now free(even with former yearly charge) and no ad serving at least at the moment?
I think it’s all wrapped in the Facebook business model – which is to sell ads, more ads, and much more ads. Although they may never advertise on WhatsApp, they can track users to where they go after ‘WhatsApping’ and flood them with ads. Thanks to the FB Pixel service, ads can now follow you anywhere you go.
Acquiring WhatsApp, just like Instagram, is one of the trade-offs the company had to make in order to galvanize its core value proposition to advertiser. Although the company still clings to their user-first policy, the bottom-line hasn’t changed. WhatsApp acquisition means they’ve expanded their radar on users; they now know more about user behaviour; that way, they can push more ads with more precision wherever the user go.
Another parallax: Google acquired YouTube not because it’s a money spinner, but because it’s a new avenue to sell more Google ads.
The value of a business is usually spread over a long period of time. 10, or even 20 years. That’s especially why it is advised to build businesses that will last for an era, and not merely consistent with a fad.
Peter Thiel mentioned in his Stanford Startup School video on how he calculated the future “value”(I’m using this as a placeholder because I can’t remember the actual finance term), when he was PayPal CEO, and what he got that most of PayPal value was in 2015 and beyond. He did this calculation about 1999. Pray you make it there to grab your value before you are “disrupted” by new comers. Which again is argument for anyone to be intentional when thinking about the business they wish to found, and make it strong.
WhatsApp’s value is in the future. And Mark is a genius. We all can tell from his Instagram acquisition that is now looking like a steal.
Some perspective http://www.theguardian.com/media-network/media-network-blog/2014/feb/21/zuckerberg-facebook-whatsapp-mobile
The WhatsApp acquisition was a strategic one… not a “make money tomorrow” one.
Opinion I highly value below…
https://stratechery.com/2014/messaging-mobiles-killer-app/
https://stratechery.com/2014/social-conglomerate/
Really strategic as @xolubi pointed out, but how sure are we that new comers like Telegram won’t push them out considering the features it supports.
I believe its not unconnected with Facebook making the FAN available to websites and blogs to reach more audience.
More ads
If they didn’t buy Whatsapp and it existed as maybe a Google product…well…
Even if Google didn’t acquire, assuming they are slow. WhatsApp was becoming a dangerous company to Facebook even as an independent company, at the rate of its growth. Now at 1B, they can do anything with that figure. Anything they touch will become a hit, back to back.
Who cares what it’ll become or not, it’s better to have the monster on our side.
Going by your input, it wasn’t about the profit, apparently, you’re ssying its ‘the threat’
I still think the aim of every business is maximum profit.
$19B isn’t a small amount.
Anyway, thanks for your input
Yahoo could have acquired Facebook @ $1.5B back in the day. It was not profitable then, and $1.5B is still no baby money. Google too.
When you see fire, bring it to your side asap. And that’s Zuck’s obsession with snapchat now.
What can you do with a FREE product with 1 Billion users?
A Lot.
Right now, WhatsApp is losing money. But based on an earlier announcement, we know they are changing their monetization model. It looks likely it will take a big bite from WeChat’s model. WeChat claimed each user is worth $7 per annum. That means if WhatsApp launched its business model, their is potentially $7 billion on the table every year even if it refused to grow its user base.
Curious to know how WeChat is making money? This is How WeChat is making money
I thought WhatsApp is now encrypted. WhatsApp can no no longer read your messages.
Reading messages and understanding(and eventually making money from) user behaviour based on data are two different things. Nobody has the time to sit and be reading your sexts.
Ermm, I’m confused though. So you’re saying whatsapp can get user data and behavior, without skimming through my conversations??
Whatsapp Business accounts could be huge. A lot of businesses already support customer comms via the app; a host of small businesses all over the globe.
I can think of a number of features if added to Whatsapp could take the rugs off whatever’s left of the live chat software/service industry.
PS: FB actually acquired Whatsapp for $22B.
//Facebook offered $4 billion in cash and $12 billion in stock, with the company’s founders eligible for an additional $3 billion in restricted stock. But as Facebook’s own stock has continued to rise, so has the value of the deal. The final tally came in at $21.8 billion, as the Deal Professor noted this month.
Of course, Facebook can afford to spend lavishly. Since announcing its acquisition of WhatsApp, Facebook stock has risen 20 percent, giving it a market value of $208 billion. Investors appear unfazed by the willingness of its founder, Mark Zuckerberg, to make huge bets on money-losing companies, instead trusting Silicon Valley logic over conventional measures of corporate worth.
And acquiring WhatsApp was never about making money for Facebook, at least not yet. Instead, Mr. Zuckerberg was enticed by the company’s swift accumulation of 450 million users at the time of purchase. “Services in the world that have one billion people using them are all incredibly valuable,” Mr. Zuckerberg said on a conference call at the time of the deal// http://dealbook.nytimes.com/2014/10/28/facebooks-21-8-billion-acquisition-lost-138-million-last-year/?_r=0
The actual amount of cash Facebook spent was $4B. It exchanged the rest for Facebook shares. Facebook shares grew BECAUSE of this acquisition. The reason the deal was valued at that amount was because Facebook shares actually grew because of this acquisition.
Imagine what would have happened to Facebook stock if this acquisition was not done? Investors are more comfortable to assign a higher valuation to them after they bought possible competition. This deal is in favor of Facebook because of huge capital gains. Those gains in valuation will net off any purchase price. Of course the Whatsapp founder’s share in Facebook also grow too as well. This was a win-win deal for both companies and very well structured.
Couldn’t have been put better. Hopefully @Henry_Obinna has some clarity now.
Yea, 
A simple case of working together and creating a more valuable company, rather than competing and reducing each other’s valuation. African startups actually really need to learn this. The mechanics of this deal fascinates me. Whatsapp technically made a loss the year after the deal but Facebook’s value still grew. I am sure the founders can’t wait for their vesting period to end.
Very interesting insight into the ‘aqui-merger’ almost perfectly suitable for both competition.
But I’d like the ask for the benefit of a related discourse; in the absence of the stock market how does FB truly extract Whatsapp’s value?
Because in the long term this same stock market will begin to react if Whatsapp continues to lose money without a clear 1B user strong monetization plan for the future.
