Google bid $10B for WhatsApp, made separate 'odd' offer before Facebook deal was struck

Posted:
in General Discussion edited February 2014
Before WhatsApp was acquired by Facebook this week for some $19 billion in cash and stock, the messaging service was being aggressively pursued by search giant Google, which reportedly offered $10 billion and also made a unique offer in attempt to ensure it wouldn't be outbid.

whatsapp


Facebook announced on Wednesday that it will acquire the popular online messaging app for $16 billion in cash and stock, plus an additional $3 billion worth of restricted stock units. CEO Mark Zuckerberg said he believes WhatsApp, which boasts 450 million active monthly users, is on a path to 1 billion users, making the company "incredibly valuable."

Another company that found WhatsApp worth a considerable sum was Google, which apparently offered $10 billion to acquire the company before the Facebook deal was struck, according to Jessi Hempel of Fortune. And while Facebook's deal comes with a board seat for WhatsApp founder Jan Koum, Google's offer reportedly did not.

But Google's pursuit of WhatsApp didn't stop there, as the search giant also made an "odd" offer to the service more than six months ago, according to The Information. Google was apparently willing to potentially pay millions of dollars to WhatsApp just for the right to be notified if and when it entered into acquisition talks with other companies.

Google's so-called "right-of-notice" offer to WhatsApp is said to be a unique negotiating tactic the company employs to be alerted about potential startup acquisitions. The strategy was reportedly employed after Google was caught off-guard by Facebook's $1 billion purchase of Instagram in 2012.

As of Thursday, WhatsApp ranks as the No. 6 most popular free application available on the iPhone App Store. With more than 5,000 user rankings, it's earned an average score of four-and-a-half out of five stars.

Nearly a year ago, Google was rumored to be well into negotiations with WhatsApp, and was allegedly considering a $1 billion price tag for the cross-platform messaging app. At the time it was claimed that the WhatsApp team was playing "hardball" in negotiations with Google.

Without advertisements, WhatsApp managed to pull in considerable revenue with a simple annual subscription fee. Users who download the application get the first year free, and pay $0.99 per year after that.

Both Facebook and Google already have their own popular messaging clients, with Google Talk available to users of Gmail and other services from the company, while all Facebook users have access to the social network's Messenger service.
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Comments

  • Reply 1 of 38
    macxpressmacxpress Posts: 4,861member

    It just seems to me that Google is buying companies just for the sake of buying them. There's no rational at all for Google buying some of the companies they do other than buy them before someone else does. If I were a shareholder, I'd be upset at this. Its fine to buy a company if you have an intent on using it for an actual purpose to either release a new product, or make an existing one better, but buying one just for the sake of buying it before someone else does is just plain silly to me. 

  • Reply 2 of 38
    And it's March, 2000 all over again...
  • Reply 3 of 38

    Just because you can do a thing, does not mean you should do a thing.  Just because FB could outbid Goog doesn't mean it should have done so.

     

    In fact, it's a shame FB couldn't merely succeed in goading Goog to buy WA, since I see little opportunity for advertising profit from WA's impoverished users.  Instead, FB should have let Goog acquire WA and dilute their customer demographics, thus making FB users a more elite group, having greater value to advertisers.  But no, FB is too worried about user-share. So score one for Google in this game.

  • Reply 4 of 38
    rogifanrogifan Posts: 10,669member
    Good lord that UI is hideous. I keep forgetting that's what iOS used to look like. :wow:
  • Reply 5 of 38
    rogifanrogifan Posts: 10,669member
    macxpress wrote: »
    It just seems to me that Google is buying companies just for the sake of buying them. There's no rational at all for Google buying some of the companies they do other than buy them before someone else does. If I were a shareholder, I'd be upset at this. Its fine to buy a company if you have an intent on using it for an actual purpose to either release a new product, or make an existing one better, but buying one just for the sake of buying it before someone else does is just plain silly to me. 
    and where is all the tech user outrage at larger companies swooping up and buying smaller companies just because they can? Look what Google did with Motorola. They basically stripped Moto of the good bits and then sold off the stuff they didn't want. If Apple had done that the outrage would have been enormous.
  • Reply 6 of 38
    macxpress wrote: »
    It just seems to me that Google is buying companies just for the sake of buying them. There's no rational at all for Google buying some of the companies they do other than buy them before someone else does. If I were a shareholder, I'd be upset at this.

    It seems shareholders are very happy, probably because it is better to spend 10B$ in acquisitions than in buyback with the same final result.

    Apple usually avoids large acquisition in order not to compromise profits, especially if the projected profit percentage is much lower than Apple's. But should reconsider and be more aggressive.
  • Reply 7 of 38
    rogifanrogifan Posts: 10,669member
    Wow the Zuckerberg hype machine is in full force today on CNBC.
  • Reply 8 of 38
    maestro64maestro64 Posts: 4,563member
    I thought it was $16B why is it now $19B, must be new found Wall Street math.

    I as said it stupid money purchase, it is about making sure the other guys does not get the company.

    From the looks of it, since Apple has been blocking google access to iOS users they going to try and buy popular iOS apps and some how back door themselves into get iOS user data.
  • Reply 9 of 38
    rogifanrogifan Posts: 10,669member
    bradipao wrote: »
    It seems shareholders are very happy, probably because it is better to spend 10B$ in acquisitions than in buyback with the same final result.

    Apple usually avoids large acquisition in order not to compromise profits, especially if the projected profit percentage is much lower than Apple's. But should reconsider and be more aggressive.
    So Apple should do large acquisitions because Google does? Sorry I want Apple to do what they think is best for Apple, not for short term investors that just want to see Apple mimic Google or Samsung or whoever's stock happens to be "in" right now.
  • Reply 10 of 38
    john.bjohn.b Posts: 2,720member

    Anyone using WhatsApp was, by definition, not using messaging options from Facebook (or Google).  I'm not sure how this creates "new" Facebook users.  Many WhatsApp users will likely move to <whatever new messaging app is popular> by the time Facebook integrates this into their "experience".

     

    And speaking of experience, there is no way that Facebook (or for that matter, Google) could monetize a deal like this without bring ad revenues into the mix.  So either the ad-free app now gets ads in the bargain, affecting the four-and-a-half star experience, or every text gets read, stored, and indexed to provide targeted ads.  Which was the reason WhatsApps was popular in the first place.

     

    As far as the "millions of dollars for the right to be notified if and when it entered into acquisition talks with other companies"...  Creepy Google is creepy.

  • Reply 11 of 38
    john.bjohn.b Posts: 2,720member
    Quote:

    Originally Posted by Maestro64 View Post



    I thought it was $16B why is it now $19B, must be new found Wall Street math.



    I as said it stupid money purchase, it is about making sure the other guys does not get the company.

     

    A lot of times the total "price" number gets adjusted to include the value of stock, cash on hand, etc.

     

    Quote:

    Originally Posted by Maestro64 View Post



    I as said it stupid money purchase, it is about making sure the other guys does not get the company.

     

    Quote:

    Originally Posted by Rogifan View Post



    Wow the Zuckerberg hype machine is in full force today on CNBC.

     

    If Zuckerberg was really all that, Facebook would've developed this internally, not overspent 19 billion on what amounts to an SMS app.

  • Reply 12 of 38
    Google only offered $10 Billion for a money-making company?? They have spent more than that for a money-losing company!

    Now that Google is feeling all butt hurt, they will likely go out and overspend on something like the Russian KGB's list of "past customers."

    I can't see the value of WhatsApp's customer base. They only have 450 million active customers that can afford to cough up 99 cents per year. This group of users find texting each other about the minutia of their empty lives to be the apex of "cool." How fast will this short attention span customer base stick around once something else shiny comes along? What are the important demographics of this bunch of squirrels? It can't be worth too much if the world leaders of "Overspenders Anonymous" only thinks this asset is worth only half as much as the Facebook fratboy paid for it.

    [COLOR=blue]Apple is quietly amused by all this hubris over a messaging app.[/COLOR]
  • Reply 13 of 38
    Thank you, Facebook for stopping Google from sucking everything into its "membership requirement" maw and gathering even more personal info on us.
  • Reply 14 of 38
    john.b wrote: »
    maestro64 wrote: »
    I thought it was $16B why is it now $19B, must be new found Wall Street math.


    I as said it stupid money purchase, it is about making sure the other guys does not get the company.

    A lot of times the total "price" number gets adjusted to include the value of stock, cash on hand, etc.

    True, but in this case it turns out it was $19B all along. I had a discussion on this yesterday where I thought I read it correctly:
    MENLO PARK, CALIF. – February 19, 2014 – Facebook today announced that it has reached a definitive agreement to acquire WhatsApp, a rapidly growing cross-platform mobile messaging company, for a total of approximately $16 billion, including $4 billion in cash and approximately $12 billion worth of Facebook shares. The agreement also provides for an additional $3 billion in restricted stock units to be granted to WhatsApp’s founders and employees that will vest over four years subsequent to closing.

    source: FB

    Wouldn't that turn out to be 4 + 12 + 3 = 19?
  • Reply 15 of 38

    This whole messaging thing reminds me of the 90's when every company had their of IM client but now of them talk to each other so if you had lots of friend and were unsuccessful at convincing them all to use the same IM you have to have multiply IM clients running. Then someone will create a client which will bring them all together for you. Not sure why you need another messaging app, maybe FB bought it to take it off the market so they do not have to compete with it.

  • Reply 16 of 38
    cnocbuicnocbui Posts: 3,613member

    What an absurd amount to pay for an app.

     

    More money than sense if you ask me.

  • Reply 17 of 38
    Quote:
    Originally Posted by PhilBoogie View Post





    True, but in this case it turns out it was $19B all along. I had a discussion on this yesterday where I thought I read it correctly:

    yeah I figure that out, but you can not estimate the RSU value, since the value is set on the day it vests. It is a $4B today but if FB price goes up then the value of their $4B worth of RCU will increase. It could cost FB and its investors a lot more. Since RCU are purchase by the company at the time of vesting. FB just made Billionaire and Multi-Millionaires out of all the Whatapp employees. 

  • Reply 18 of 38
    maestro64 wrote: »
    philboogie wrote: »
    True, but in this case it turns out it was $19B all along. I had a discussion on this yesterday where I thought I read it correctly:
    yeah I figure that out, but you can not estimate the RSU value, since the value it set on the day it vests. It is $4B today but if FB price goes up then the value of their $4B worth of RCU will increase. it could cost FB and its investors a lot more. Since RCU are purchase by the company at the time of vesting. FB just made Billionaire and Multi-Millionaires out of all the Whatapp employees. 

    Yeah, I got that. I just didn't understand why I had to go to a lengthy discussion on the 4 + 12 + 3 = 19 issue. Thanks for elaborating though. Even if the deal is off FB still has to pay $1B in cash + $1B in stock.
  • Reply 19 of 38
    jungmarkjungmark Posts: 6,687member
    $10 billion is so unlike Googs. I would have figured they would bid $12.3456 billion or a Fibonacci sequence. Or just blow $15 billion.
  • Reply 20 of 38
    Quote:

    Originally Posted by macxpress View Post

     

    It just seems to me that Google is buying companies just for the sake of buying them. There's no rational at all for Google buying some of the companies they do other than buy them before someone else does. If I were a shareholder, I'd be upset at this. Its fine to buy a company if you have an intent on using it for an actual purpose to either release a new product, or make an existing one better, but buying one just for the sake of buying it before someone else does is just plain silly to me. 


    450 milliion active users, with projections taking it to one billion active users.  That's not buying for the sake of buying.  Even someone as big as Google would rather pay cash (which it has a ton of) to acquire those users versus growing that user base organically...even though they may have the engineering and financial resources to do so.

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