Google made last-ditch effort to block WhatsApp-Facebook deal, was willing to pay more than $19B

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  • Reply 81 of 168
    jungmarkjungmark Posts: 6,926member
    Zero benefit??? What is the benefit facetime users get if it cannot even be used across platforms? I am an iPhone user, but me and most people I know use Skype instead of Facetime. Not because it is better, but because non-Apple users can communicate with it, too. A non-universal messaging or videoconferences app is a non-starter.

    Zero benefit for Apple. Why should Apple spend $$$ to subsidize free loaders (Android)? I tell me people if you want to get group messages, get an idevice or Mac. My brothers have idevices and most of my friends do as well.
  • Reply 82 of 168
    Quote:

    Originally Posted by jungmark View Post





    Zero benefit for Apple. Why should Apple spend $$$ to subsidize free loaders (Android)? I tell me people if you want to get group messages, get an idevice or Mac. My brothers have idevices and most of my friends do as well.



    It's the difference between being a serious player in a market and having a novelty gimmick that only users of your device can use.

  • Reply 83 of 168
    Quote:

    Originally Posted by knowitall View Post





    No, Android users will install iMessage for the same reasons iOS users installed WhatsApp . And note that WhatsApp is currently the only cross platform solution.



    Except for Skype, Facebooks current messenger, Viber, WeChat, Nimbuzz, plus don't Google and Yahoo also have cross platform alternatives. Twitter isn't far off being comparable either.

  • Reply 84 of 168
    jungmarkjungmark Posts: 6,926member
    timgriff84 wrote: »

    It's the difference between being a serious player in a market and having a novelty gimmick that only users of your device can use.

    Wait so now there is a messaging market? How is it a gimmick? iPads, iPhones, and Macs can all "talk" to each other.
  • Reply 85 of 168
    timgriff84 wrote: »

    It's the difference between being a serious player in a market and having a novelty gimmick that only users of your device can use.

    The situation is different when the "users" number in the hundreds of millions.
  • Reply 86 of 168
    Quote:
    Originally Posted by knowitall View Post





    No, Android users will install iMessage for the same reasons iOS users installed WhatsApp . And note that WhatsApp is currently the only cross platform solution.

    Gtalk/Hangouts and Facebook messenger aren't cross-platform? Just about every  messaging system except iMessage is cross-platform.

  • Reply 87 of 168
    Quote:

    Originally Posted by jungmark View Post





    Zero benefit for Apple. Why should Apple spend $$$ to subsidize free loaders (Android)? I tell me people if you want to get group messages, get an idevice or Mac. My brothers have idevices and most of my friends do as well.

    What an arrogant statement to make. Who are you to tell your friends which device to use? There is a freedom of choice in democratic countries. My family has mostly Apple devices, too. But others may make different choices. Either because they cannot afford buying everything Apple for their families or because they don't want to. Should I unfriend them for that? Or be the guy who tries to force them to buy Apples stuff in order to communicate with me? Do I get paid by Apple? Not a dime. I pay for the products they sell me. That's it.

     

    It costs very little (compared to Apples operational costs) to make something like iMessage universally available. It is probably too late to gain any significant market share anyways.  But it would also be a good service to Apple customers to make iMessage platform-agnostic. The value of a communication tool increases with the number of people you can reach. Limiting yourself or customers NEVER adds value. The so-called free-loaders (Android smartphones and contracts do still cost money as you should know) don't get subsidized by opening up to them. They already have other choices. It simply helps increasing the value of said service to those who bought Apples devices. That should be worth a couple of $$$ to Apple.

  • Reply 88 of 168
    d4njvrzf wrote: »
    Gtalk/Hangouts and Facebook messenger aren't cross-platform? Just about every other messaging system except iMessage is cross-platform.

    Right... So there are plenty of alternatives for people to choose from, further reinforcing the notion that Mark Zuckerberg has foolishly squandered Facebook money in a pointless bidding war with Google.
  • Reply 89 of 168
    dasanman69dasanman69 Posts: 13,002member
    The situation is different when the "users" number in the hundreds of millions.

    And those hundreds of millions of users are using another service to message another hundreds of millions of family and friends.
  • Reply 90 of 168
    Quote:
    Originally Posted by Crowley View Post

     

    Didn't say "opportunity", that's your words appended to mine.

     

    WhatsApp charges $0.99 per year of use (I think).  That is the case whether their users have Facebook accounts or not.  Not sure how that makes me all over the map, it's a simple point.


    LOL. That's what makes it worth $19B (or $16+B, or whatever). Got it.

  • Reply 91 of 168
    Quote:

    Originally Posted by jungmark View Post



    Wait so now there is a messaging market? How is it a gimmick? iPads, iPhones, and Macs can all "talk" to each other.



    Errr yeah, fairly massive one. SMS messages alone generate around 60 billion in revenue every year. Even Microsoft's Lync has now achieved a $1billion per year revenue now.

     

    If your a business, iMessage and Facetime is a non-starter as a messaging / video chat solution as it's not going to work for all your users. Could you seriously imagine asking a client to do a meeting on Facetime?

     

    In your personal life it's fine so long as you never want to communicate with someone who doesn't have an Apple device and as popular as they are the majority of the world doesn't have an Apple device. That makes it a gimmick. Cool tech but no serious plans to become a market leader.

  • Reply 92 of 168
    Quote:

    Originally Posted by timgriff84 View Post

    SMS messages alone generate around 60 billion in revenue every year. 

    Cite?

  • Reply 93 of 168
    MarvinMarvin Posts: 15,360moderator
    Let’s generously assume that WhatsApp will have FB’s margins as a stable business: that’s ~30%, or $138M per year. I won’t bore you with the details, but suffice it to say that under the most generous assumptions about future growth rates, risk-adjusted discount rates, reinvestment rates (after all, future cash flows don’t come free), etc., this is worth somewhere between ~$1B and ~$3B. That’s a far cry from $16+B. Justifying the latter price will require unbelievably high growth rates, achieved at essentially zero reinvestment, with a discount rate that is equal to the risk-free rate of interest.

    from what I've read, their revenue (not cash flows, not profits) in 2013 were $20M.

    I agree with you that the price was far too high but that seems to have been down to a bidding competition with Google - they're to blame for inflating the price so high in the first place. I just don't think it's a worthless buy, which is being suggested with the mentions of every WhatsApp user already being a Facebook user.

    The figure of $20m in 2013 was profit on revenue of $100m but these are estimates as the company is private. I would guess it's based on iOS members paying up-front plus revenue estimates from previous year members on other platforms renewing subscriptions and then estimating profit on costs of similar companies. The iOS app used to be $0.99 one-off while other platforms were free and $1.99 after the first year. The iOS one went free mid-2013 with $0.99 after 1 year.

    As far as margins, Facebook has over 6,000 employees, Twitter has over 2000, WhatsApp has 55 so that cuts some costs considerably. It's not clear what server infrastructure costs there are but potentially, they can share these costs to an extent with Facebook's infrastructure so they get increased revenue from both but the costs become lower than both (higher than Facebook and WhatsApp alone).

    Let's say they did have $100m revenue in 2013 but their net margins are 30% due to the low staff count rather than Facebook's 20%. $30m net income. Say they lower their infrastructure costs by sharing with Facebook and push costs down to get to 40% margins. Revenue grows to $450m next year from this year's users so $180m net income. Ignore any migration from WhatsApp to Facebook but consider the other way and that the WhatsApp users grow to 1 billion and then slow down. With 40% margins, that's $400m net income in 2015. If it doesn't grow, that revenue keeps coming in forever.

    To pay off $19b, it would have to run like that for about 50 years so that's why I agree it's far too high a purchase price but it can be justified if their numbers turn out as I described. A more realistic purchase price I'd say would take into consideration the possibility that people stop using it within 10 years as technology changes and that would give it no more than $5b value.

    Facebook has 2.5 billion outstanding shares, 1.7 billion floated and we can safely assume these are not undervalued so the only objection to them doing this really is that they could have invested those shares in something other than WhatsApp. But who can say what's more important to Facebook's future goals than the people running Facebook?
  • Reply 94 of 168
    Quote:
    Originally Posted by Marvin View Post





    I agree with you that the price was far too high but that seems to have been down to a bidding competition with Google - they're to blame for inflating the price so high in the first place. I just don't think it's a worthless buy, which is being suggested with the mentions of every WhatsApp user already being a Facebook user.



    The figure of $20m in 2013 was profit on revenue of $100m but these are estimates as the company is private. I would guess it's based on iOS members paying up-front plus revenue estimates from previous year members on other platforms renewing subscriptions and then estimating profit on costs of similar companies. The iOS app used to be $0.99 one-off while other platforms were free and $1.99 after the first year. The iOS one went free mid-2013 with $0.99 after 1 year.



    As far as margins, Facebook has over 6,000 employees, Twitter has over 2000, WhatsApp has 55 so that cuts some costs considerably. It's not clear what server infrastructure costs there are but potentially, they can share these costs to an extent with Facebook's infrastructure so they get increased revenue from both but the costs become lower than both (higher than Facebook and WhatsApp alone).



    Let's say they did have $100m revenue in 2013 but their net margins are 30% due to the low staff count rather than Facebook's 20%. $30m net income. Say they lower their infrastructure costs by sharing with Facebook and push costs down to get to 40% margins. Revenue grows to $450m next year from this year's users so $180m net income. Ignore any migration from WhatsApp to Facebook but consider the other way and that the WhatsApp users grow to 1 billion and then slow down. With 40% margins, that's $400m net income in 2015. If it doesn't grow, that revenue keeps coming in forever.



    To pay off $19b, it would have to run like that for about 50 years so that's why I agree it's far too high a purchase price but it can be justified if their numbers turn out as I described. A more realistic purchase price I'd say would take into consideration the possibility that people stop using it within 10 years as technology changes and that would give it no more than $5b value.



    Facebook has 2.5 billion outstanding shares, 1.7 billion floated and we can safely assume these are not undervalued so the only objection to them doing this really is that they could have invested those shares in something other than WhatsApp. But who can say what's more important to Facebook's future goals than the people running Facebook?

    That is pretty good description of the deals value. Yet, I think people are overly critical when it comes to purchase prices compared to market capitalization. Using the dcf method companies like Twitter, Amazon or Linkedin are also way overvalued.

  • Reply 95 of 168
    Quote:

    Originally Posted by anantksundaram View Post

     

    Cite?


    http://www.telecoms.com/212062/global-sms-revenue-declines-for-first-time/

     

    4th paragraph "In 2014, Deloitte expects operators to generate more than £60bn from SMS services in 2014" and it's an article on revenue declining.

  • Reply 96 of 168
    Quote:

    Originally Posted by SpamSandwich View Post





    The situation is different when the "users" number in the hundreds of millions.



    Doesn't matter how many hundreds of millions there are when the person you want to message doesn't have an Apple device.

  • Reply 97 of 168
    crowleycrowley Posts: 10,453member
    Quote:
    Originally Posted by anantksundaram View Post

     

    LOL. That's what makes it worth $19B (or $16+B, or whatever). Got it.


    Didn't say it was worth it.  No need for LOLs or the passive aggressive snark, as that was never the argument. If that's what you thought, then that explains why you quoted me and the matter can be dropped as a simple misunderstanding.

  • Reply 98 of 168
    timgriff84 wrote: »
    Doesn't matter how many hundreds of millions there are when the person you want to message doesn't have an Apple device.

    1) You're now talking about from the user's perspective but your original comment can't reasonably be about the user when you talk about serious players in the market.

    2) As previously stated there is no incentive for Apple to expand iMessage to other platforms because of their rampant success. There is the app store so if you think iMessage is a "novelty gimmick" you have plenty of other options for cross-platforms messaging but it's hard to conceive that you'd own anything from Apple if you think the iMessage service is both a novelty and a gimmick.
  • Reply 99 of 168
    Quote:

    Originally Posted by SolipsismX View Post





    1) You're now talking about from the user's perspective but your original comment can't reasonably be when about the user when you talk about serious players in the market.



    2) As previously stated there is no incentive for Apple to expand iMessage to other platforms because of their rampant success. There is the app store so if you think iMessage is a "novelty gimmick" you have plenty of other options for cross-platforms messaging but it's hard to conceive that you'd own anything from Apple if you think the iMessage service is both a novelty and a gimmick.



    Users are what market share is based on. What other perspective can you use to determine if something is serious or not other than the users. A messaging service where there is no possibility of messaging 86% of smartphone users (Google search said current iPhone UK market share is 13.6%) can hardly be called serious.

     

    For the record I use iMessage and Facetime on an almost weekly basis to communicate with family as we all have iPads and Macs. But I wouldn't call it any more of a serious messaging platform than messaging someone on Xbox Live.

  • Reply 100 of 168
    jungmarkjungmark Posts: 6,926member
    What an arrogant statement to make. Who are you to tell your friends which device to use? There is a freedom of choice in democratic countries. My family has mostly Apple devices, too. But others may make different choices. Either because they cannot afford buying everything Apple for their families or because they don't want to. Should I unfriend them for that? Or be the guy who tries to force them to buy Apples stuff in order to communicate with me? Do I get paid by Apple? Not a dime. I pay for the products they sell me. That's it.

    It costs very little (compared to Apples operational costs) to make something like iMessage universally available. It is probably too late to gain any significant market share anyways.  But it would also be a good service to Apple customers to make iMessage platform-agnostic. The value of a communication tool increases with the number of people you can reach. Limiting yourself or customers NEVER adds value. The so-called free-loaders (Android smartphones and contracts do still cost money as you should know) don't get subsidized by opening up to them. They already have other choices. It simply helps increasing the value of said service to those who bought Apples devices. That should be worth a couple of $$$ to Apple.

    I'm sorry but I can SMS Androiders just fine. They can SMS me as well.
    timgriff84 wrote: »

    Errr yeah, fairly massive one. SMS messages alone generate around 60 billion in revenue every year. Even Microsoft's Lync has now achieved a $1billion per year revenue now.

    If your a business, iMessage and Facetime is a non-starter as a messaging / video chat solution as it's not going to work for all your users. Could you seriously imagine asking a client to do a meeting on Facetime?

    In your personal life it's fine so long as you never want to communicate with someone who doesn't have an Apple device and as popular as they are the majority of the world doesn't have an Apple device. That makes it a gimmick. Cool tech but no serious plans to become a market leader.

    Again, I can SMS non Apple owners just fine.
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