

Why WhatsApp is worth $19 billion - limejuice
http://money.cnn.com/2014/02/20/technology/social/whatsapp-19-billion/index.html?hpt=hp_t1
WhatsApp may be &quot;cheaper&quot; than most rivals: Facebook paid just $30 per Instagram user at the time (the service had 33 million users when Facebook bought it, compared to 150 million today). Facebook is spending $42 per WhatsApp user.
But given WhatsApp&#x27;s enormous user base, its purchase price might be a bargain compared some of its competitors. LinkedIn&#x27;s (LNKD) share price values that professional social network at $153 per user. Twitter trades at $140 per user, and Facebook is at $123. Even at its latest $2 billion valuation, Snapchat trades at $50 per user. (And Snapchat reportedly turned down a $3 billion offer from Facebook last year.)
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jdubya
It is fairly obvious to me why FB believes WhatsApp is worth this
extraordinary sum.

The application is inherently social. Obviously, it is a texting/sms/chat
whatever you want to call it, application.

a) I read somewhere that they (WhatsApp) add 1,000,000 users a month. b) They
have group chat. c) They have grown by 200% YoY iirc d) Their execution on the
engineering side has been great e) The ubiquity of the application and the
execution of their marketing efforts, no manner how small, have worked
tremendously and they know how to replicate that effect.

If those five things are not the impetus for establishing a serious competitor
to FB I do not know what is. 19bln to fend off what could become a serious
competitor is a pretty sound strategic maneuver. Especially since FB revenue
per user of the platform is around $4.00 - $6.00. Add 400,000,000 more users
to the platform and you bolster the power of the FB brand, get more ads in
front of 400mln users and expand your reach into unpenetrated markets that do
not have internet access reliable enough to use facebook. App or otherwise
this is a great step for the WhatsApp team. They sure didn't get it for a
discount but the potential consequences of letting WhatsApp keep getting users
and not addressing that directly would have been rather risky.

There is my armchair analysis.

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limejuice
From the article:

"WhatsApp may be "cheaper" than most rivals: Facebook paid just $30 per
Instagram user at the time (the service had 33 million users when Facebook
bought it, compared to 150 million today). Facebook is spending $42 per
WhatsApp user. But given WhatsApp's enormous user base, its purchase price
might be a bargain compared some of its competitors."

"LinkedIn's (LNKD) share price values that professional social network at $153
per user. Twitter trades at $140 per user, and Facebook is at $123. Even at
its latest $2 billion valuation, Snapchat trades at $50 per user. (And
Snapchat reportedly turned down a $3 billion offer from Facebook last year.)"

This reminds me of the dot.com bubble era where prices were justified by
comparing to other over inflated stocks.

I'm surprised WhatsApp didn't go IPO. With the relative lack of new tech IPOs,
I could have seen WhatsApp IPO at a $50 BLN or maybe even $100 BLN valuation,
after analysts hyped it up using the same analysis as above. A case can be
made that WhatsApp would have kept growing much faster than Facebook and
eclipsed Facebook in a few years time.

Facebook FB 69.63 +1.57 +2.3% closed positive today after opening lower.
($64.50 in afterhours trading)

