
Famous tech acquisitions’ cost per user - RougeFemme
https://public.brightside.io/v1/chart/ece4947eb29375535376ca212578cf78
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oskarth
Wow. This graph is certainly illuminating:
[https://public.brightside.io/v1/chart/321ef2c603e8d67080afcd...](https://public.brightside.io/v1/chart/321ef2c603e8d67080afcd92f48e1d69)

450000000 is _a lot_ of users. Metcalfe's law says that the value of a
communication network is proportional to the square of the connected users.
Then add to this the amazing growth they are seeing. I don't think people
quite realize what this means.

EDIT: In general, it baffles me how many armchair opinionators there are.
Isn't it more interesting to try to understand _why_ FB paid $16B, rather than
saying why they _shouldn 't have_?

~~~
Retric
Metcalfe's law is clearly wrong after a network get's overly large. I could in
theory call a random person in China but if I have no way of communicating
with them it's practically worthless to do so.

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nl
Cat gifs are pretty universal.

But seriously: I've had people on conference calls when they couldn't
understand the language, but someone wanted them to see slides. The fact they
could join the call (in that case on Skype) definitely made the network more
valuable.

You might argue that the fact you can't speak to some of them drops the value
per user, and that is true to some extent. But the fact they are on there and
attract other people (some of whom you can speak to) adds value for you, too.

~~~
Retric
Orders of magnitude. Sure, adding someone else in china is in theory worth
something. However adding one more friend that I regularly communicate with on
a network is worth more to me than every person in China.

PS: For large networks X Log X is probably much closer to reality than X ^2.
Just compare the amount of internet bandwidth between NY to California vs the
bandwidth between the US and China.

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encoderer
Yeah but isn't that the point?

Metcalf's law is not suggesting "The value of the network to any random node
within the network." Because that measure is very subjective in the ways you
say.

Instead, it's "The total value of the network to all nodes". Because the more
people in the network, the higher the probability that the nodes you DO care
about are also connected.

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simonsarris
I do not like charts like this because their existence implies that cost per
user somehow matters, or is a deciding factor even, in the price of an
acquisition.

Even if that was the major metric in determining a price, there's often a very
large difference between the number of users currently and the expected number
1 year or 5 years out.

You don't buy a company because of the number of users it has right now. You
buy it because you think you can do something better with it, or to be
defensive in a field, or to expand your own customer lists.

What's more, not all users are created equal! When Flickr for instance was
aquired, _what percentage of users were paying users?_

I think its hard to make any real generalizations here, but better than a
chart of cost per user, I think this is probably closer to a chart of how
badly Company X feels it needs some audience. It's some formulation of growth,
panic, defensiveness, etc.

~~~
asanwal
Fair point, but like it or not, cost per user matters.

\- When investing in or acquiring companies, people may use this metric in
addition to price/sales or in rare cases for tech companies price/EBITDA
valuation multiples. It forms the basis for comps analysis which bankers, M&A
types and VCs do all the time.

\- Companies use the ratio in similar ways when fundraising or talking to
acquirers. "Based on how many users we have and comparable transactions, we're
worth $X million"

\- While you may buy users looking forward, you also may look at how you can
"monetize" existing users, i.e., if we can get $X per existing user, that
would be worth Y.

It is of course not the only metric that an acquirer evaluates (at least the
good ones), but they do look at it as do investors, bankers and startups. So
good or bad, it is here to stay.

~~~
darkarmani
What, showing lines of code is out these days?

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chavesn
All this shows to me is how useless it is to compare by "cost per user". The
note at the bottom says _" Facebook acquired WhatsApp for 16 billion dollars,
the largest startup acquisition to date. Cost per user was comparable to
Google's YouTube acquisition."_.

It's _sort of_ close, but we're still talking about a swing of >30% there --
$5 _billion_ dollars in WhatsApp's case.

There are many things missing from "cost per user" but I think the first thing
to ask is "user doing _what_ "?

~~~
alexeisadeski3
Oh my god...

I'd forgotten completely about YouTube. At under $2B, that must have been one
of the best acquisitions of the whole bunch.

YouTube for 1/10 the cost of WhatsApp.

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billspreston
Best acquisition? When was the last time you gave Youtube money (or Google
money to watch videos)? The fact that their videos are no unwatchable because
of quality stutters and the inability to rewind/jump, it's only a matter of
time for a new video site to take over.

~~~
skj
It's your right to complain about Youtube quality these days (from what I
understand ISPs tend to throttle them mercilessly), but it was clearly an
extremely good buy for Google, and Google makes tons of money off of Youtube
ads.

When was the last time you paid Google for search results? Meh, can't be
making that much money.

~~~
billspreston
| When was the last time you paid Google for search results? Meh, can't be
making that much money.

Nice way to show I was wrong :)

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ghayes
Uh, is it just me or is this chart having a hard time with comma versus period
for "thousands separator"? Broadcast.com is listed as having $10,961 cost per
user, but comes up as $10.961 on the chart. [Sale price of 5.7B for 520K
active users]

~~~
SnowProblem
It's not just you. I was about to post this.

On a related note, 11K per user is insane. What did Yahoo see in
Broadcast.com?

~~~
genofon
Mark Cuban

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AznHisoka
More accurately, they had a vision of Mark Cuban getting rich, buying the
Dallas Mavericks, and hanging out with beautiful women ^_^

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mmanfrin
Broadcast.com's bar is incorrectly scaled down 1000x -- overlay shows cost per
user is over $10k, but it lists at $10.

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gcb0
indeed. it was the first thing i looked for... and when i saw $10 i was
shocked that broadcast.com had any use let alone billions...

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gcb0
* user, not use. but that works too...

and does it include the youtube legal deals and fines? probably not

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ig1
So this story has 210 points, 80 comments and has been up for 13 hours and yet
no-one has mentioned that the data is completely wrong.

There's no accounting for inflation. Comparing a nominal 1999 dollar amount
with a nominal 2014 dollar amount is like comparing a euro amount with a
dollar amount without doing an conversion (which would actually still be more
accurate).

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rayiner
Kind of dumb to compare U.S./Western Europe users to primarily non-U.S. users
as is the case for Whatsapp. I'd bet a 19 year old in India is an order of
magnitude less valuable from an advertising standpoint than a 19 year old in
America. Not only because people have less disposable income in those
countries, but because kids have less control over their parents' disposable
income.

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bicknergseng
I think the cost per employee is even more interesting. $320 mil for every
WhatsApp employee, compared with ~$76 mil for everyone at Instagram.

Now is a good time to be in the yacht business.

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nl
Some of these acquisitions weren't done for the users.

Aardvark, Jaika, Dodgeball, Picasa, Broadcast.com, FriendFeed (missing), maybe
Flickr as well as more recent acquisitions like DeepMind ($900M to Google,
zero users) were bought for some combination of the team and the technology.

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arasmussen
There's this thing called sorting which makes stuff a lot easier to read and
more informative.....

~~~
Blahah
Yup, I came here to say this.

~~~
Link-
Me 3... Was actually digging into the source to see if I can find a way to
sort this 'thing'.

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chaz
Interesting dataset, though I do have some quibbles. For example, registered
users aren't the same as monthly unique visitors, which is how CNET is best
measured. And ecommerce like Zappos have completely different metrics. One
thing I would like to see is the user numbers normalized against web users at
the time, which helps put late 90s acquisitions in better perspective.

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dman
I think the more fascinating metric here is cost per employee which gives us
an idea of economic value created per employee. Whatsapp destroys the other
acquisitions on this metric.

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bungabunga
I am surprised Google's acquisition of the thermostat company is not included.
$30,000 per user.

~~~
gregcrv
I think you missed a zero... 3,200,000,000 / 1,100,000 = 2,909 dollars / user

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rm999
It would be interesting to compare this to the equivalent metric for companies
that went public: the market cap per user at IPO (or maybe X days after the
IPO if there's a lot of volatility?). I'm curious how the valuations differ
between IPOs and acquisitions. On one hand IPOs are determined by the open
market instead of opaque decisions by a small handful of people. On the other
hand, private acquisitions are probably less regulated and allow for more
insider information in the pricing (?).

Some other dimensions I'd be interested in are the number of employees, year,
current number of users, and (for public companies) current market cap. For
acquisitions I'd be curious if there are any decent objective metrics of the
"success" of the acquisition.

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TorKlingberg
For many of these each active user drives many passive visitors. Examples:
Geocities, Flickr, YouTube.

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hankScorpi0
Cost per user is moot when compared against companies which inherently have
different users, across different types of devices. Take our latest spot of
head-scratchery ala WhatsApp, it's easy to do math and say: "oh right they
paid about 40$ a user." Did they really?

WhatsApp has a huge set of "new" users on new and old devices. So, how again
is a WhatsApp user on some random (non-smart) phone in India, as "valuable" to
Facebook as one sitting in the Valley with their iWhatever.

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drakaal
Several sources estimated that 1/3 of whatsapp users were spam accounts. So
the numbers are a bit off. I would also like to see this adjusted for "Today
Money" which would put things like Geocities WAY up there.

I quoted a source at $80 per actual users base on the Monthly Uniques.

[http://www.forbes.com/sites/shelisrael/2014/02/25/2329/](http://www.forbes.com/sites/shelisrael/2014/02/25/2329/)

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jiggy2011
How are we defining a user here? For example in the case of youtube, do we
count people who watch videos? People who sign up and comment? People who
upload videos?

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Grue3
Absolutely useless metric, both mathematically and economically.

When a service has a lot of users, it has no room for growth and cost per user
will be small.

When a service has a few users, but has potential to grow exponentially, it
will have high cost per user.

Economically there's a large difference between services with respect to their
monetization. A service where each user pays $1000 will have higher cost per
user than a free service.

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malcolmmcc
Ironically, I _only_ make Google money through YouTube when I'm _not_ a
registered user, because when I am I have AdBlock on and it's only when I'm in
an incognito mode or different browser/profile that the ads get shown.

So yeah, users not necessarily the most relevant metric there. Which, upon
reflection, makes YouTube even _more_ of a steal than it looks in the chart.

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rubyn00bie
Uhhh... neat, but can we see profit/revenue per user in that list? I think
this is pretty much useless without that context.

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FigBug
Most of those were a complete waste of money. Seems like the majority of the
big money acquisitions did not live up to the hype.

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vishrad
I really want to see Txn Size / Employee. Equity never gets meted out equally
across employees. However as a worker bee I am the 'dog that eat the scraps
from the table'. When the $/employee is high, even non-founder, non-dev#1
employees make out well. IMHO, the last such exit was YouTube, before WhatsApp
ofcourse.

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kamilszybalski
You forgot about how much Microsoft paid for Hotmail.. i think it was
$40/user.. $400 million for 10 million users

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pedalpete
Would be interesting to see this go one step further to list annual revenue
per user at the time of acquisition.

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sek
A FeedBurner "User" is not equal, this was a publisher service.

The real target were the feed subscribers, or maybe they are where can I check
the data?

The same goes for Youtube, how many visitors did they have? They bring in the
ad revenue.

Compared to Facebook/Whatsapp where you can usually only participate by being
a user.

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carlosrt
Revenue Multiple would make a more useful chart to me. Broadcast.com had $60M
in revenue when they sold. Knowing they sold at ~98x revenue seems more useful
to me when pricing a stock.

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thrush
Another interesting metric would be cost per user minute (would probably need
to be normalized over a time period like day, week, month, or year, or
quarter).

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joshconstine
Who made this? I want to cite it properly on TechCrunch?

~~~
Grue3
Please don't, Techcrunch quality is already low enough even without charts
based on bad statistics.

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rtpg
it's odd that we focus so much on just user numbers yet talk so much about
aqui-hiring.

In most cases it's not just the users they're trying to get, but also the
talent (with the idea that most of them aren't one hit wonders).

Acting like startup acquisition is a single-metric game seems like a gross
oversimplification. This chart only proves it by showing there is little
correlation between user count and buy price.

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MaysonL
And how much is Time Warner Cable going for? Somewhere around $2K/subscriber?
WhatsApp, with 30X the userbase, costs ~1/2 as much.

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dustcoin
Relevant to yesterday's news: Acquiring MtGox for "free" would cost ~$336 per
user if the leaked crisis document is accurate.

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allochthon
One remarkable thing about this list -- with the benefit of hindsight, I only
like five or six of the acquisitions all that much.

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_sentient
Interesting analysis, but that flickering tooltip issue is beyond annoying. A
quick UI fix would be a big improvement.

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brianbreslin
Can someone remind me what aardvark did?

~~~
abvdasker
My thoughts exactly.

Apparently it was a Q&A site that asked questions to friends and friends-of-
friends.

This chart is the sweetest of schadenfreude — so many terrible acquisitions
for huge sums of money.

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selectout
Didn't realize Aardvark only had 90,000 users. Huge win for the Aardvark team
with that sale.

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bedhead
Cost per user makes EV/Sales look like an ultra-precise and dependable measure
of value.

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joelthelion
I think a more useful coloring would be by period: "first internet bubble",
etc.

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abbott
PayPal was a steal.

~~~
LandoCalrissian
So was Youtube, pretty interesting to put it in perspective.

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msoad
We can add Viber for compression too: $3 per user

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watermarkcamera
No wechat or weixin on this chart ?

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talon88
No Tumblr on this chart?

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michaelochurch
The cost per employee numbers are what have me raging. Given how much value
engineers produce (even mediocre ones, much less us closer to the 10x
persuasion) how the fuck did we end up being so lowly valued?

I think the answer is that we suck at fighting for our own interests. A
traditional union might not be the answer, but something like the SAG might be
the way to go. It's absolutely inexcusable that computer programmers don't,
for example, have the right to have a representative when negotiating with
management or HR.

