- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Facebook buys messaging app 'Whatsapp' for $16 Billion
Posted on 2/19/14 at 5:07 pm
Posted on 2/19/14 at 5:07 pm
LINK
Can any of you finance whiz kids tell me how they came up with a $16 Billion valuation for a frickin' messaging app? What goes into such valuations? Can somebody walk a non-finance person through the process?
Can any of you finance whiz kids tell me how they came up with a $16 Billion valuation for a frickin' messaging app? What goes into such valuations? Can somebody walk a non-finance person through the process?
5
Posted on 2/19/14 at 5:56 pm to saintforlife1
Apparently it is huge outside of the US where people do not have unlimited texting.
Posted on 2/19/14 at 6:04 pm to saintforlife1
quote:
Can any of you finance whiz kids tell me how they came up with a $16 Billion valuation for a frickin' messaging app? What goes into such valuations?
That's probably how much it took to make Whatsapp cave.
You have to realize that Whatsapp only employs ~50 people, and they have over 400million monthly users. Many of those likely pay the $1 per YEAR fee for the service. So on the order of a few hundred million revenue with minimal expenses, plus continuing and accelerating growth? Whatsapp had basically no reason to sell for anything other than an enormous amount.
On the Facebook side, Whatsapp is a half a billion user social network (many of them outside the US) that they basically had to acquire at whatever cost, at the risk of losing many of their own users who primarily do messaging to Whatsapp.
Posted on 2/19/14 at 6:14 pm to saintforlife1
400 million users is probably the biggest reason. The other is that this sort of app is extremely popular and will likely make regular texting obsolete.
Posted on 2/19/14 at 6:16 pm to saintforlife1
Tech bubble.
The kids/teens are done with Facebook so they are trying to buy up whatever the kids are into as they emerge.
$19 billion is insane.
The kids/teens are done with Facebook so they are trying to buy up whatever the kids are into as they emerge.
$19 billion is insane.
Posted on 2/19/14 at 6:50 pm to Scoop
Users for advertising. FB, Google etc have set themselves up so they almost need to buy competitors, real or potential.
It is going to be an issue for them going forward. When? No idea, but the issue will emerge, as history usually repeats itself. There is opportunity to profit from this btw.
It is going to be an issue for them going forward. When? No idea, but the issue will emerge, as history usually repeats itself. There is opportunity to profit from this btw.
Posted on 2/19/14 at 6:55 pm to Scoop
quote:
Tech bubble.
The kids/teens are done with Facebook so they are trying to buy up whatever the kids are into as they emerge.
$19 billion is insane.
Well, the majority of that insane amount is to be paid in overvalued stock. Does that sort of put it back into the realm of sanity?
Not to mention Whatsapp probably earns in the neighborhood of a quarter billion, and that can easily double in a year. That puts the P/E around 40, right? Not totally insane for a growing company.
Posted on 2/19/14 at 8:43 pm to Korkstand
I have a 13 year old son and a 14 year old step son in the house. Both are typical teenagers glued to their iPhones and iPads back and forth with friends.
Neither has heard of Whatsapp. Not joking.
Neither has heard of Whatsapp. Not joking.
Posted on 2/19/14 at 9:27 pm to Scoop
Posted on 2/19/14 at 9:33 pm to Scoop
quote:
Neither has heard of Whatsapp. Not joking.
Because unlimited texting is the norm here. It isn't the case in most countries.
Posted on 2/19/14 at 10:12 pm to Eric Nies Grind Time
quote:
Apparently it is huge outside of the US where people do not have unlimited texting.
If you travel outside the States not a single person has a texting plan. Everyone only has Whatsapp. It's just understood.
It's pretty cool, basically the same thing as iMessages. Anywhere you have Wi-Fi you can text.
Posted on 2/19/14 at 11:06 pm to Scoop
quote:
I have a 13 year old son and a 14 year old step son in the house. Both are typical teenagers glued to their iPhones and iPads back and forth with friends.
Neither has heard of Whatsapp. Not joking.
That is exactly the reason these users are so valuable to Facebook. There is little overlap between Facebook users and Whatsapp users. They are basically adding 25% to the size of their userbase (and potentially a 25% revenue boost). This on top of the existing Whatsapp revenue stream.
In addition, these users are a new source of data. AND Whatsapp had the potential to leech users from Facebook, so eliminating that threat has some value.
And Facebook surely has more info than we do. All in all, I think Zuckerberg knows what he's doing.
Posted on 2/19/14 at 11:28 pm to Korkstand
$19 Billion for a free messaging app ran by 55 people?
I get that it is big outside the US.
Still.
That's just goofy.
It's gonna jack up the market for acquisitions to a ridiculous level.
I get that it is big outside the US.
Still.
That's just goofy.
It's gonna jack up the market for acquisitions to a ridiculous level.
This post was edited on 2/19/14 at 11:32 pm
Posted on 2/19/14 at 11:31 pm to Scoop
I use it and I don't see any ads. Not sure where the revenue comes from.
Posted on 2/20/14 at 12:04 am to Korkstand
Or, put another way, Facebook's revenue is about $10billion ($2.5billion last quarter) with about 1.25 billion active users, so each user generates about $8/year. Whatsapp will bring in over 400 million users, and that number is growing very, very rapidly, but let's assume that after a couple years of growth and assimilation, Facebook will manage to monetize 400 million new users as a result of this.
That works out to $3.2billion in yearly revenue. Let's assume that Facebook's current ~20% profit margin applies here, and call it $640million in yearly profit. How much would you pay for that income? 10X? 15X? We are approaching $10billion already, and it is entirely feasible for Facebook's profit margins to grow to 30 or 40% after the growth phase is over.
Is any of this far out there?
That works out to $3.2billion in yearly revenue. Let's assume that Facebook's current ~20% profit margin applies here, and call it $640million in yearly profit. How much would you pay for that income? 10X? 15X? We are approaching $10billion already, and it is entirely feasible for Facebook's profit margins to grow to 30 or 40% after the growth phase is over.
Is any of this far out there?
Posted on 2/20/14 at 12:13 am to econ85
quote:
I use it and I don't see any ads. Not sure where the revenue comes from.
They give you a free year of service, after which it's 99 cents per year. Users are worth more than that to Facebook, though.
Posted on 2/20/14 at 6:59 am to Korkstand
After one year the app costs 1$
Posted on 2/20/14 at 8:50 am to Scoop
quote:
Tech bubble.
The kids/teens are done with Facebook so they are trying to buy up whatever the kids are into as they emerge.
$19 billion is insane.
Comparing FB to a tech bubble is pretty shortsighted IMO. The tech bubble was a whole different monster, any company with so much as a .com in their name was blowing up. These were companies with no financial history, or history at all for that matter.
You're comparing that to a company that has generated $3.7, $5, and nearly $8 billion dollars in revenue over the past 3 years, and net income of $1+ billion in 2 of those years.
A company that has over 1 billion users.
And a company whose logo is posted on every commercial, website, or anything resembling a business advertisement you see.
Facebook isn't simply a social platform for teens anymore, it really has become the number 1 platform in the world to connect to other people around the world. And they just purchased the number one messaging platform in the world.
If you think that is trivial, then I don't know what would impress you.
And this is all coming from a person that despises Facebook.
Posted on 2/20/14 at 9:49 am to Scoop
quote:
have a 13 year old son and a 14 year old step son in the house. Both are typical teenagers glued to their iPhones and iPads back and forth with friends.
Neither has heard of Whatsapp. Not joking.
wait til college and young adults - i use it primarily with my overseas friends, who i assume your 13 and 14 year old friends are lacking.
it started with a friend who moved to france and after a couple months of trading facebook chats here and there i got "hey can you switch to whatsapp to talk? its what everyone traveling uses and its easier for me"
This post was edited on 2/20/14 at 9:53 am
Posted on 2/20/14 at 10:01 am to rintintin
quote:
Comparing FB to a tech bubble is pretty shortsighted IMO. The tech bubble was a whole different monster, any company with so much as a .com in their name was blowing up. These were companies with no financial history, or history at all for that matter.
Exactly. The "tech bubble" was propped up by a ton of companies that not only weren't turning profits, but many hadn't generated any revenue to speak of (and some hadn't even figured out how they were going to do so).
We may be in another bubble, but investors are wiser and this new round of tech companies are actually making money to back up their valuations.
The tech companies of today are sort of proving that the investors of 15 years ago were right: users are valuable. They jumped the gun by a decade, but now companies know how to monetize. Facebook generates $8/user/year, Google generates $30-40/user/year. Facebook can probably double their per-user revenue (and still fall far short of what Google is able to do), making the purchase of half a billion users look even more attractive.
$19 Billion may turn out to be a bargain for access to a userbase larger than the population of the US.
Page 1 of 2
Popular
Back to top
Follow TigerDroppings for LSU Football News