Seeking Alpha

No ads for WhatsApp; Zuck praises startup's engagement rates

  • WhatsApp is the only app with better engagement and a greater proportion of daily users than Facebook (FB), says Mark Zuckerberg on a CC discussing Facebook's reasons for spending up to $19B to buy the messaging upstart..
  • Zuck also praised WhatsApp's engineering team for creating a service with unmatched speed and reliability. VC backer Jim Goetz echoes that sentiment, and notes WhatsApp has only one developer for every 14M active users.
  • Both Zuck and WhatsApp CEO Jan Koum insist the service won't feature ads, and the latter says monetization isn't a near-term priority. Many see the deal as being less about monetization than about (expensively) heading off an emerging threat.
  • Zuck also argues WhatsApp and Facebook Messenger serve different purposes - the former acts as an SMS replacement, the latter as a way to have IM-like chats with friends.
  • Facebook's presentation slides (.pdf) note WhatsApp's daily traffic includes 19B messages (approaching global SMS levels), 600M+ photos, and 100M+ video messages, and that these figures are all up over 100% Y/Y.
  • Nonetheless, plenty of jaws have dropped over the deal's price tag. WhatsApp is being assigned a valuation higher than that of 235 S&P 500 components.
  • FB -2.9% AH. Previous: Facebook buying WhatsApp, details.
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Comments (24)
  • crorec
    , contributor
    Comments (70) | Send Message
     
    FB is so worried about becoming NoSpace they buy or try to buy any threat, regardless who they throw money at the inevitable will happen, the only looming question is when!
    19 Feb 2014, 07:19 PM Reply Like
  • smart_investoor
    , contributor
    Comments (229) | Send Message
     
    they are desperate. it looks like the market players got facebook's back by boosting their share price and allowing them to buy whatever they want. they are basically printing money.
    19 Feb 2014, 11:23 PM Reply Like
  • andypochta1
    , contributor
    Comments (1225) | Send Message
     
    $19 Billion??? For a mobile app??? OMG!!
    Facebook understands less about what a Billion dollars is than even FB "investors".
    Is that how they "grow"?
    Beginning of the end...
    20 Feb 2014, 07:32 AM Reply Like
  • movies555
    , contributor
    Comments (1090) | Send Message
     
    Ridiculous price tag. Social is starting to feel awfully .com-y. I'd rather just go with Google.
    19 Feb 2014, 08:14 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (9719) | Send Message
     
    Can someone tell me what FB owns or is developing that can't be copied repeatedly by competitors?
    19 Feb 2014, 09:03 PM Reply Like
  • drpersky@drpersky.com
    , contributor
    Comments (124) | Send Message
     
    DeepValueL,

     

    That would be the greatest form of media communication in the history of man….and becoming greater. Be well.

     

    Doc
    19 Feb 2014, 11:09 PM Reply Like
  • bernie123
    , contributor
    Comments (155) | Send Message
     
    No ads today.............doesn't mean no ads in 2015. FB will control the largest ad audience in the world and will be able to target that consumer with customized products based on each users buying and interest profile.
    19 Feb 2014, 08:22 PM Reply Like
  • andypochta1
    , contributor
    Comments (1225) | Send Message
     
    More like FB will go broke in 2015..
    20 Feb 2014, 07:36 AM Reply Like
  • MichiganTrader
    , contributor
    Comments (73) | Send Message
     
    I am a fan of the expanded reach and increased user base whatapp brings to Facebook. I also believe the acquisition was a solid purchase and will reap benefits and dividends in the future, but the price paid seems outrageous right now.
    19 Feb 2014, 08:43 PM Reply Like
  • SoldHigh
    , contributor
    Comments (1013) | Send Message
     
    Clearly, the smartest group in the room here is those from WhatsApp
    19 Feb 2014, 08:55 PM Reply Like
  • bronchiti
    , contributor
    Comments (52) | Send Message
     
    I remember when Facebook bought Instagram for 1 billion...19 Billion for Whatsapp made my jaw hit the floor. Nevertheless I still believe in Zuckerberg until future earnings and guidance hit the fan.
    19 Feb 2014, 08:56 PM Reply Like
  • Stephen Aniston
    , contributor
    Comments (3018) | Send Message
     
    This easily overtakes Mark Cuban's sale of Broadcast.com to Yahoo for $7 billion as the greatest tech M&A ripoff.
    19 Feb 2014, 09:40 PM Reply Like
  • Tricky
    , contributor
    Comments (1590) | Send Message
     
    I'd still have to give that title to the AOL-Time Warner merger ;-)
    19 Feb 2014, 09:50 PM Reply Like
  • Continental Kid
    , contributor
    Comments (228) | Send Message
     
    What a stupid amount to pay.....out of FB stat.....made good money ...but will not trust this management after this...
    19 Feb 2014, 09:43 PM Reply Like
  • syrupticious
    , contributor
    Comments (7) | Send Message
     
    And who's gonna be cheated out of the $19 billion?? poor FB investors. I'm giving a price target of $45 for FB in the next 6-months. I'm thinking of going short FB soon.
    19 Feb 2014, 10:34 PM Reply Like
  • howieLONG
    , contributor
    Comments (42) | Send Message
     
    Crorec, care you enlighten as to you you assume FB bought whatsapp? Guess I'll take a stab.

     

    Yes, it adds to their young demographic base and expands their reach deep into Asia. Most interesting though it is a pseudo move into the telecom sphere. Whatsapp is huge in parts of the world where users text and chat over the internet and not through costly voice and data plans. Maybe this is part of a much further out strategic mobile strategy. And let's remember it was $4B in cash. Crazy valuation I would agree but the structure of the deal made it easy for them to swallow. Not thrilled today as a shareholder but am willing to give they some benefit for the time being. Let's wait and let the market digest before coming to any conclusions based on motivations we don't see or can comprehend.
    19 Feb 2014, 11:15 PM Reply Like
  • justhinkin01
    , contributor
    Comments (8) | Send Message
     
    crorec, are you to close to the tree's to see the forest. This is incredible and smart! OMG!
    19 Feb 2014, 11:15 PM Reply Like
  • liusing
    , contributor
    Comments (745) | Send Message
     
    Whatsapp will be charging fees, so ad is not in the picture (yet).
    But I rather see some ads than have to pay.

     

    450M users, 50% paying $1 is 225M per year, someone else to calculate how to valuate its value !
    20 Feb 2014, 02:56 AM Reply Like
  • thesuer
    , contributor
    Comments (352) | Send Message
     
    Facebook actually paid 4 billion in cash and the rest in stock. 19 billion with 2 billion in breakup fees. Forget the stock as that is probably locked up and is accounted for but the cash payment is actually equivalent to 1,5 usd per Facebook shareholder or 2.2% like a dividend. The stock should open approximately 2.2% or more down. The deal at 4 billion is cheap the rest is paper millionaires, what dreams are made off. How do you monetize this who cares, everyone's uses what's app!
    20 Feb 2014, 04:29 AM Reply Like
  • andypochta1
    , contributor
    Comments (1225) | Send Message
     
    Actually 16 Billion is cash, more than FB ever had in the bank, so they spent all their money plus money they dont have plus diluted own investors.
    20 Feb 2014, 08:03 AM Reply Like
  • thesuer
    , contributor
    Comments (352) | Send Message
     
    4 billion cash, the rest is stock!
    21 Feb 2014, 09:09 AM Reply Like
  • mike_w
    , contributor
    Comments (6) | Send Message
     
    I read that Facebook paid $35 per WhatsApp user at the current user base volume. If WhatsApp continues to grow at the reported pace (1 million new sign-up daily), it will lower the cost per user on a daily basis.

     

    $12bil of the purchase was paid with FB stocks. As FB continues to monetize on its' core business and develop new revenue streams (Instagram, Paper, and possibly a search engine), this cost will also drop in terms of share volume.

     

    Now the big question - Is WhatsApp really worth $16bil? it has a huge active daily user base, and plenty of space on the user homepage for ads, but if FB sticks to WhatsApp's current business model which is not running ads, how will this benefit FB?
    20 Feb 2014, 05:29 AM Reply Like
  • andypochta1
    , contributor
    Comments (1225) | Send Message
     
    This will go into history as the craziest and most irresponsible waist of shareholders money.
    $19 Billion for an app thats here today gone tomorrow.
    20 Feb 2014, 07:44 AM Reply Like
  • calikym
    , contributor
    Comments (226) | Send Message
     
    @andypochta1 - but they care why? They are laughing all the way to the bank.
    20 Feb 2014, 08:52 PM Reply Like
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