Is WhatsApp at all worth $19 Billion?
If we go by the regular financial metrics, the reply would be an obvious ‘of course not’! But in spite of the bold reply, Facebook CEO Mark Zuckerberg thought otherwise! In fact, on announcing the deal he referenced this specifically:
“There are countries [such as] Korea or Japan where another messaging service is bigger, but if you look across the world, WhatsApp – across Europe, Latin America, India, a lot of places in Asia – is the clear leader.”
WhatsApp is how Facebook hopes to fill in its global gaps.
“Once we get to being a service that has a billion, two billion, three billion people one day, there are many clear ways we can monetize,” he said intently.
Will WhatsApp now wipe out other instant messengers?
No, WhatsApp is about replacing SMS.
WhatsApp is not about wiping out instant messengers from the likes of Facebook, Twitter, Instagram, Skype and Google – those services all have ecosystems that WhatsApp cannot replace. Instead WhatsApp is about replacing SMS.
Like SMS, key to WhatsApp’s success is its lack of an ecosystem. It is lean, uncluttered and simply ties to your phone number. While the world switches from minutes and messages to data bundles phone numbers aren’t going anywhere for at least a decade. WhatsApp can become the SMS of the future, succeeding where MMS has failed miserably.
In many ways, WhatsApp’s users are just the kind of customers Facebook is looking for. They are extremely active, sending more than 600 million photos a day — more photos than Facebook (FB, Fortune 500) users upload. A whopping 70% of WhatsApp users are active every day. By way of comparison, 62% of Facebook users are active daily.
People around the world send 19 billion WhatsApp messages per day, including 200 million voice messages and 100 million videos.
Through WhatsApp, Facebook increases its users DB
WhatsApp has a very strong foothold internationally, particularly in Europe, India and Latin America. Those are regions where Facebook is trying to grow its base of users. WhatsApp and other mobile messaging services also are widely used by teens and tweens, a group that has notoriously been ditching Facebook for rival services, including text message services and Snapchat.
“Facebook users were complaining dearly about the lack of one-on-one personalized socializing and sharing, which WhatsApp clearly has been successful with,” said Vidya Nath, research director at Frost & Sullivan.
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.)
“We don’t think the company overpaid for WhatsApp,” said Peck. “We think WhatsApp and Facebook were likely to more closely resemble each other over time, potentially creating noteworthy competition, which can now be avoided.”