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Facebook the leading social networking website acquired Whats-app for $22 billion. Was Whats-app making profits?? Was Whats-app reducing Facebook users?? What did Facebook gain of this acquisition?? Can Facebook use Whats-app users for its own use??
Yes and No. Whereas some would have heard of the $17 billion figure only, the surge in this number has been a result of rising stocks of Facebook after its Whats-App acquisition. And this is when Facebook hasn’t really tried anything to earn out of it and has focussed on the user base of Whats-App only. Though some reports suggest that it was foolish to buy a company that made $20 million in sales the previous year(and was making considerable losses) at such a price , it is evident that many people have “moved on” from Facebook to Whats-App, for eg. students no longer share classnotes and news on Facebook and do so on WhatsApp. While the intention of Facebook can be viewed from a positive angle of reaching to more and more people through WhatsApp, the fact that it has paid a price that it may not makeup through its bought product still stands
So, the bottomline is that there is some anticipatory Maths involved in the answer to your question. Time would only tell.The correct figure was 19 billion USD ( 3 billion USD in cash + 16 billion USD of FB stock) . It has to be remembered here, that this was a pre-emptive strike by Facebook to prevent any other company from reaching the same proportion as its own.
Another major reason is fact that Facebook wants its valuation to be justified by increasing market shares across channels, as its revenue is miniscule compared to its astronomical 100 billion USD IPO valuation and huge market capitalization.
ya the rise in the stock price of Facebook had modified the 19 billion to 22 billion. And Facebook used this approach to eliminate any further reduction in its user hours (number of hrs used by the user) , but i think Facebook might use the database of the users in different ways.
Interesting thread guys.. Here’s my take on this. Facebook / any social network is measured by the number of users and how long they stay on the site. More the merrier. They realized that their user base is more but time spent is not what they want it to be. Meanwhile, WhatsApp was taking this “social media” world by storm. Facebook introduced their own version of messaging, which didnt work at that time and was no competition to WhatsApp. Also, users can share photos and videos on whatsapp to a select group more easily compared to FB.
If you can’t fight them, join them – or in this case, buy them. By buying WhatsApp, they ensured a lot of things –
– Their user base increased significantly (which also helps them justify the valuation, as Abhirup explained)
– They became the leader in messaging market
– They ensured WhatsApp doesn’t go to Google (I think Google was also interested)
Also, we are considering what WhatsApp is doing currently. Think of the future possibilities. Just a thought – can we share money using WhatsApp in the future? Imagine WhatsApp having a wallet option which can help the user share money instantly with their friends. Or they can integrate with some of the existing wallet providers / network providers in select markets. With RBI working towards easing the norms for non banking institutions, India can also be one of the benefactors. This is just one possibility. Using WhatsApp data, FB can predict what each user is interested in and show relevant ads on their FB profile.
Although, today it seems to be highly overpriced deal, this may well turn out be the biggest bargain in the long run if FB uses WhatsApp properly..
Great insight Binu. And Yes I also read about Google being interested in buying WhatsApp for around 10 billion $. Still it is argued that Facebook will not be able to make back its purchase price. Hence, it all comes down to the manner in which we are talking about the profitability here. If in terms of the user-base and preventing others from reaching its stature then Yes it was a good deal. If in terms of money, then sadly for Facebook, it is not so
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