Facebook to buy messaging app WhatsApp for $16B plus $3B in RSUs

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  • Reply 81 of 104
    rcfa wrote: »
    Apple should finally publish the iMessage/FaceTime specs as they originally promised; the reality is there are Android phones, and when faced with the choice of cross-platform protocols or single platform protocol, cross-platform wins due to (quite literally) network effects.
    So without open specs that allow third parties to make iMessage/FaceTime compatible apps on other phones, Apple undermines the utility and penetration of their own products.
    I keep using Skype and to a lesser degree WhatsApp and Viber because all three allow me to reach friends using a variety of different phones, incl. the iPhone.
    The iMessage/FaceTime contacts list is rather short, and the apps only see use in special cases or when I actually send an SMS to a relative stranger which then ocasionally gets converted to an iMessage.
    I much rather see iMessage/FaceTime gain more users.
    danox wrote: »

    It doesn't bother me that Apple keeps all of their best tech proprietary. They make aspirational products and the world is beating a path to their door.
  • Reply 82 of 104
    rogifanrogifan Posts: 10,669member
    Spoiler:
    And only Apple will be sitting pretty with billions in the bank.
    Apple's sapphire investment represents about 3% of FB's purchase of whatsapp. But I'll bet it provides more $ to the bottom line and a better ROI. I will not be surprised to see FB having to do a write down in the future.
  • Reply 83 of 104

    HOW exactly, is a messenger app worth BILLIONS??

     

    This is getting a little ridiculous, and for some reason fills me with a sense of foreboding. Something just isn't right about trends like this. 

  • Reply 84 of 104

    Two important issues here, to my eyes:

    1. The bulk of WhatsApp users are using non iOS implementations, and are merely avoiding the cost of direct SMS/txt messaging. This is why the app requires access to the entire contact list: it IDs users via telephone number, and sets up a parallel IM system that uses (probably WiFi, but likely any) available internet access to simulate SMS/txt messaging. Other IM systems such as Yahoo, etc., would work for them, but apparently WhatsApp is more convenient by automatically linking users to their contacts.  These must be extremely cost-conscious users (little disposable income), as is suggested by their choice of platform and rejection of SMS/txt charges. This means they have little value to advertisers.

    2. The force driving WhatsApp deployment (and similar IM systems such as iMessage) is the telecom practice of charging for SMS/txt messages, which cost them zero to deliver.  Try having a conversation over dinner where you have to toss a quarter in a jar with every sentence spoken. By the time dessert arrives, you'll have enough quarters to pay for the entire meal. SMS/txt charges can easily add up to $100+ per month, which is noticeable and repulsive to those who want to pay only $100 for an android phone and rarely pay for apps, let alone make in-app purchases.

     

    My conclusion is twofold: Telecom companies are a root cause of the problem, and the users aren't of much value to advertisers. As such, why anyone would pay $50 each to gain their custom is a mystery.  One explanation is incompetence of the corporate leadership. Or stupidity. Another explanation is that there is some grander scheme that makes this unlikely and expensive acquisition worthwhile.  Some say FB is eliminating a competitor.  But if your competitor has only taken customers that don't generate revenue, who cares?  In fact, if all the non-revenue-generating customers went to a competitor, it strengthens your own brand. Which is what Apple has done. 

  • Reply 85 of 104
    quadra 610 wrote: »
    HOW exactly, is a messenger app worth BILLIONS??

    This is getting a little ridiculous, and for some reason fills me with a sense of foreboding. Something just isn't right about trends like this. 

    A fool (Zuckerberg) and his money are soon parted.

    I guess Mark and Steve Jobs' walk 'n' talks never got to the part where Steve would have told Mark to never overpay for an acquisition.
  • Reply 86 of 104
    My conclusion is twofold: Telecom companies are a root cause of the problem, and the users aren't of much value to advertisers. As such, why anyone would pay $50 each to gain their custom is a mystery.  One explanation is incompetence of the corporate leadership. Or stupidity. Another explanation is that there is some grander scheme that makes this unlikely and expensive acquisition worthwhile.  Some say FB is eliminating a competitor.  But if your competitor has only taken customers that don't generate revenue, who cares?  In fact, if all the non-revenue-generating customers went to a competitor, it strengthens your own brand. Which is what Apple has done. 

    You said it. Facebook just paid a bundle for deadbeat texters. Not very smart.
  • Reply 87 of 104
    quadra 610 wrote: »
    HOW exactly, is a messenger app worth BILLIONS??

    This is getting a little ridiculous, and for some reason fills me with a sense of foreboding. Something just isn't right about trends like this. 

    A fool (Zuckerberg) and his money are soon parted.

    I guess Mark and Steve Jobs' walk 'n' talks never got to the part where Steve would have told Mark to never overpay for an acquisition.

    Here' san interesting read...

    http://www.gq.com/blogs/the-feed/2014/02/16-things-facebook-couldve-bought-for-16-billion-instead-of-whatsapp.html
  • Reply 88 of 104
    gatorguygatorguy Posts: 20,710member
    "[B]$19.5 billion.[/B]
    That's the amount Facebook (FB) actually is paying for WhatsApp, based on today's closing stock price of $68.06 per share. In calculating the overall price, Facebook used the average of the six trading days preceding Feb. 18 -- which worked out to only around $65.27 per share. Facebook shares are off a bit in aftermarket trading, but still above the $65.27 mark.

    [B]35%[/B]
    That's how much of Facebook's cash is being used for this deal. Pretty extraordinary, given that this is mostly a stock transaction.

    [B]1[/B]
    That's how many venture capital firms currently own shares in WhatsApp. The lottery winner here is Sequoia Capital, which led the company's Series A round back in early 2011.

    [B]$60 million[/B]
    That's how much we hear that Sequoia invested overall into WhatsApp, over three rounds of financing (only the first of which was ever publicly reported). The bulk of that was part of a $50 million Series C infusion that WhatsApp quietly closed in the middle of last year.

    [B]$3.4 billion[/B]
    That's a ballpark figure for how much Sequoia will make on the deal. My understanding is that it holds a WhatsApp ownership percentage in the "high teens" -- placing it between $3.2 billion (17%) and $3.6 billion (19%)."


    http://finance.fortune.cnn.com/2014/02/19/facebook-whatsapp-the-other-numbers/?iid=SF_F_River
  • Reply 89 of 104
    MarvinMarvin Posts: 14,222moderator
    rogifan wrote: »
    $19B for an instant messaging app and a CEO who says he's not interested in monitization? Give me a break.

    He said they're not interested in monetization through ads. They looked at the growth rate of WhatsApp and they mentioned growing it to 3/4/5 billion users while retaining the $0.99 yearly subscription. There was no timeframe for the extra users and they haven't considered it levelling off but even if it levels out at 1 billion users, that's $1b revenue every year from a 55 person staff. It's still a lot to pay off but what was the Facebook stock they gave away doing for them? They could have sold it for cash to investors but that doesn't grow the company in any lasting way because that cash would just have to sit somewhere else in investments or treasuries. With companies this size, it's not about the money. They have recurring revenue in the billions anyway. That's why Google can lose $9b on Motorola. Trading is always about perceived worth as far as it applies to the buyer. There's no absolute values on these things.

    There is an online gaming franchise that uses virtual currency and users buy ships and play around in space. There was a massive battle that ended up destroying an estimated $300,000 in real world money:

    http://www.wired.com/gamelife/2014/02/eve-online-battle-of-b-r/

    For people outside the game, that looks crazy to invest real money in something so pointless but it's all about the buyer and what these things mean to them. Facebook itself is not something that looks valuable, it's just a personal web page for people but the value for users is in connecting people together. It didn't have advertising at the beginning either but it became necessary to support it.

    Recurring revenue is best for longevity so large one-off purchases are not that big of a deal, especially when the exchange is an asset like stock and not operating cash. It would be interesting to know if the value was the result of a negotiation or if this was the initial offer and also their calculations in reaching the figure. Given the yearly revenue, I doubt they'd settle for less than $5b but the figure they reached is definitely on the higher end.
  • Reply 90 of 104

    Lol. yeah, half way trip to Mars, they should've taken that highway instead of buying WA.
  • Reply 91 of 104

    Okay I think I figure it out, Forget what FB is saying to the public. There has been a trend on FB of users being less and less engaged on a daily bases so it give FB less and less opportunities to put ads in front of your face. Then add in the fact FB mobile has not been going well for them. Now they can use WhatApp to collect information on the stupid things people msg each on an hourly and daily bases and then FB can target your ads to based on your chat message.

     

    Not only do you have Google reading your emails, you will now have FB reading your texts to your family and friends.

  • Reply 92 of 104

    I just realized that I paid for the app ($1) and I looked and I have "lifetime service"

     

    I wonder how many of those 450M users paid for the app and therefore won't be paying for the subscription?

  • Reply 93 of 104
    Quote:

    Originally Posted by Danox View Post

    Bitcoins?


    LOL  :-)

  • Reply 94 of 104
    Quote:
    Originally Posted by Gatorguy View Post



    "$19.5 billion.

    That's the amount Facebook (FB) actually is paying for WhatsApp, based on today's closing stock price of $68.06 per share. In calculating the overall price, Facebook used the average of the six trading days preceding Feb. 18 -- which worked out to only around $65.27 per share. Facebook shares are off a bit in aftermarket trading, but still above the $65.27 mark.



    35%

    That's how much of Facebook's cash is being used for this deal. Pretty extraordinary, given that this is mostly a stock transaction.



    1

    That's how many venture capital firms currently own shares in WhatsApp. The lottery winner here is Sequoia Capital, which led the company's Series A round back in early 2011.



    $60 million

    That's how much we hear that Sequoia invested overall into WhatsApp, over three rounds of financing (only the first of which was ever publicly reported). The bulk of that was part of a $50 million Series C infusion that WhatsApp quietly closed in the middle of last year.



    $3.4 billion

    That's a ballpark figure for how much Sequoia will make on the deal. My understanding is that it holds a WhatsApp ownership percentage in the "high teens" -- placing it between $3.2 billion (17%) and $3.6 billion (19%)."





    http://finance.fortune.cnn.com/2014/02/19/facebook-whatsapp-the-other-numbers/?iid=SF_F_River

    I have no facts to challenge those numbers except past experience with VC's, unless a company is bring lots of their own money to the table which I highly doubt WhatApp did, no VC is going to put that kind of cash on the table for a less than 20% share in the company, they want more in the 30% to 51% range since they will tell you they are the one taking all the risk. It also generally very hard to know exactly that the ownership is in a privately held company so everyone is most likely guessing.

     

    Most time the VC want to make sure they have a larger stack the founders and the employee working there, since they want control if the founders start heading off in the wrong direction, which most do.

  • Reply 95 of 104
    Quote:
    Originally Posted by TeaEarleGreyHot View Post

     

    Two important issues here, to my eyes:

    1. The bulk of WhatsApp users are using non iOS implementations, and are merely avoiding the cost of direct SMS/txt messaging. This is why the app requires access to the entire contact list: it IDs users via telephone number, and sets up a parallel IM system that uses (probably WiFi, but likely any) available internet access to simulate SMS/txt messaging. Other IM systems such as Yahoo, etc., would work for them, but apparently WhatsApp is more convenient by automatically linking users to their contacts.  These must be extremely cost-conscious users (little disposable income), as is suggested by their choice of platform and rejection of SMS/txt charges. This means they have little value to advertisers.

    2. The force driving WhatsApp deployment (and similar IM systems such as iMessage) is the telecom practice of charging for SMS/txt messages, which cost them zero to deliver.  Try having a conversation over dinner where you have to toss a quarter in a jar with every sentence spoken. By the time dessert arrives, you'll have enough quarters to pay for the entire meal. SMS/txt charges can easily add up to $100+ per month, which is noticeable and repulsive to those who want to pay only $100 for an android phone and rarely pay for apps, let alone make in-app purchases.

     

    My conclusion is twofold: Telecom companies are a root cause of the problem, and the users aren't of much value to advertisers. As such, why anyone would pay $50 each to gain their custom is a mystery.  One explanation is incompetence of the corporate leadership. Or stupidity. Another explanation is that there is some grander scheme that makes this unlikely and expensive acquisition worthwhile.  Some say FB is eliminating a competitor.  But if your competitor has only taken customers that don't generate revenue, who cares?  In fact, if all the non-revenue-generating customers went to a competitor, it strengthens your own brand. Which is what Apple has done. 


    Very interesting analysis, and I am wondering how close to the truth you are, I never saw any value in whatapp and did not understand the hype on it prior to this. However, I have unlimited texting and unlimited data on most of the iphones in our our house so we do not worry that my daughter send 13K text messages each month and used 3 or 4GB on sending instagrams or snapchats and stuff. It is the people who are not paying these costs and want a free phone and the lowest monthly sphone cost who are resorting to solutions like this and as you put it worthless to the an Advertiser, but FB has already been caught using click farms to drive up likes so they can bill advertisers at a higher rate. They could somehow use peoples stupid texts as way to advertise to them. If FB and Google do not tell the advertise the social economical background of who seeing the ads it may be a mute point.

     

    If you are a high end advertiser you want spend your ad $ on  making sure people who have the money to buy your product so you advertise in GQ or Wall Street Journal  or other similar channel since you know people with month look in those products. In the internet world it hard to know if you ad is getting in front of the right people. Especially on the android platform.

  • Reply 96 of 104
    Is watsapp gonna work on ipods and ipads now?
  • Reply 97 of 104
    gatorguygatorguy Posts: 20,710member
    One of the first things Facebook should do is re-think the code for WhatsApp. Apparently it was poorly done, ignoring basic published security protocols.

    http://www.infoworld.com/t/encryption/android-exploit-eats-whatsapp-chat-databases-238265?source=IFWNLE_nlt_sec_2014-03-13
  • Reply 98 of 104
    philboogiephilboogie Posts: 7,438member
    gatorguy wrote: »
    One of the first things Facebook should do is re-think the code for WhatsApp. Apparently it was poorly done, ignoring basic published security protocols.

    http://www.infoworld.com/t/encryption/android-exploit-eats-whatsapp-chat-databases-238265?source=IFWNLE_nlt_sec_2014-03-13

    Strange to see this coming from you: this article is about the poor implementation of SD Card slots on phones running the Android OS. It's an OS exploit as Android is the one who is "ignoring basic published security protocols".

    Reading the article further, cryptography is also done wrong on Android, according to the article. There's no mention of WhatsApp running on an iPhone, because one app doesn't have access to another app, by default.

    I guess the question is, why should Facebook* do anything? Shouldn't it be Google that needs to do the work here? Obviously I'm missing something here...

    *Has the deal been approved and finalised? $4M paid, stock transferred, details of the 46M RSU published?
  • Reply 99 of 104
    MarvinMarvin Posts: 14,222moderator
    philboogie wrote: »
    this article is about the poor implementation of SD Card slots on phones running the Android OS. It's an OS exploit as Android is the one who is "ignoring basic published security protocols".

    Reading the article further, cryptography is also done wrong on Android, according to the article.

    Fragmentation likely caused this in earlier implementations. If WhatsApp used the encryption in Android 4, it wouldn't have been available to a large portion of Android users. If they do it now, that shouldn't be as much of an issue but 1/5th of the userbase is still 200 million people.

    But Facebook surely wouldn't want the WhatsApp databases encrypted in such a way that they can't access them. They can have the databases backed up to the SD cards and have the Facebook app scan the database. It just takes a one-off scan to get the data they need. Once they know who you're connected with, that's all they need.
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