Facebook Blows $16 Billion On SnapChat Competitor WhatsApp; Stock Tanks

Tyler Durden's picture




 

America Online President and Chief Operating Officer Bob Pittman said: "Acquiring ICQ fits perfectly into our multiple-brand strategy. Like CompuServe, ICQ substantially broadens our reach in important markets not served by AOL-branded products. In addition to its international reach, ICQ has tremendous appeal among young, technically sophisticated Web users and there is remarkably little overlap with AOL."

        -  June 8, 1998, when AOL announced it paid $287 million (and another $120 million contingent) to acquire ICQ's 12 million users.

After being rebuffed by SnapChat last year to the tune of $3 billion, Facebook decided that growth at any price was all that matters by blowing more than 5 times as much on the purchase of privately-owned WhatsApp. For $16 billion ($4bn cash and $12bn stock), Facebook gets 320 million active WhatsApp users at a whopping $50 per user. Why whopping? Because a few days ago Rakuten bought Viber's 300 million users for $900 million, or about $3 a pop, and about ten times less than what Facebook just paid. Not surprisingly FB shareholders are not happy. The company, which allows users to send messages over the web for free (as opposed to traditional text messages which most Telcos are now offering for free also) "is on a path to connect 1 billion people," Zuckerberg said, adding that they are "adding 1 million people per day..." It seems, as we noted previously, that the real bubble is in private markets not public.

For those asking, Whatspp, a company most have never heard off, now has a greater enterprise value than:

  • Motorola Solutions;
  • Starwood Hotels;
  • Alliance Data;
  • Ameren;
  • Intuitive Surgical;
  • Beam;
  • Kohls'
  • Coca-Cola Enterprises
  • Wisconsin Energy;
  • Broadcom;
  • Ross Stores;
  • Southwest Airlines;
  • Tyson Foods

And so on.

 

The WhatsApp response:

Almost five years ago we started WhatsApp with a simple mission: building a cool product used globally by everybody. Nothing else mattered to us.

 

Today we are announcing a partnership with Facebook that will allow us to continue on that simple mission. Doing this will give WhatsApp the flexibility to grow and expand, while giving me, Brian, and the rest of our team more time to focus on building a communications service that’s as fast, affordable and personal as possible.

 

Here’s what will change for you, our users: nothing.

 

WhatsApp will remain autonomous and operate independently. You can continue to enjoy the service for a nominal fee. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using. And you can still count on absolutely no ads interrupting your communication. There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product.

 

On a personal note, Brian and I couldn’t be more proud to be part of a small team of people who, in just under five years, built a communication service that now supports over 450 million monthly active users worldwide and over 320 million daily active users. They have helped re-define and revolutionize communication for the 21st century, and we couldn’t be more grateful.

 

Our team has always believed that neither cost and distance should ever prevent people from connecting with their friends and loved ones, and won’t rest until everyone, everywhere is empowered with that opportunity. We want to thank all of our users and everybody in our lives for making this next chapter possible, and for joining us as we continue on this very special journey.

Based on the valuations below, it is no wonder shareholders are selling...

 

As we noted previously, the real dot-com bubble is just outside the public view...

While the world of speculative capital is focused intently on the Twitter and Facebook #Ref/0 fundamental valuations in the publicly-traded equity markets, as the WSJ illustrates, the real dot-com 2.0 bubble is occurring in the private markets. Today there are more than 30 companies in the US, Europe, and China that are valued at $1 billion or more by venture-captal firms and the club is becoming less exclusive as venture capitalists (in their ever growing speculative fervor) funnel large sums of capital into start-ups.

 

Click image for interactive and sortable WSJ infographic

 

 

In summary:

A few days ago Rakuten bought Viber for $900 million. Viber has 300 million users... $3 per user

And today Facebook bought WhatsApp for $16bn; WhatsApp has 320 million active users... $50 per user!

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Wed, 02/19/2014 - 18:35 | 4454598 RacerX
RacerX's picture

The irony is that there is a direct quote from none other than Tyler Durden himself on the Whatsapp home page (http://www.whatsapp.com/):

 

Why we don't sell ads

 

Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we dont need. - Tyler Durden, Fight Club

Wed, 02/19/2014 - 18:39 | 4454612 TruthInSunshine
TruthInSunshine's picture

Facebook has turned into "Grandparents Connection" as all the kewl kids abandon it at light speed.

Facebook should buy Yahoo, Zynga, Groupon, The New York Times & Radio Shack to really maximize its rate of decline and irrelevance.

Wed, 02/19/2014 - 18:39 | 4454624 Theta_Burn
Theta_Burn's picture

Nice...

Wed, 02/19/2014 - 18:49 | 4454662 smithcreek
smithcreek's picture

I don't live under a rock, but honest to god, I've never heard of WhatsApp.  320 million people have been keeping me out of the loop?

 

Wed, 02/19/2014 - 18:52 | 4454671 fonzannoon
fonzannoon's picture

FB is now barely down AH. Amazing.

Wed, 02/19/2014 - 18:56 | 4454687 Xibalba
Xibalba's picture

Viber

Wed, 02/19/2014 - 18:58 | 4454695 camaro68ss
camaro68ss's picture

I need to come up with a stupid ass app, self value it at 15 billion, then sell it. its that easy

Wed, 02/19/2014 - 19:10 | 4454737 Skateboarder
Skateboarder's picture

I want to see a 'social networking' service called "Soul Cell" (because 'sell' is too obvious, but 'cell' is not, and even more powerful in concept).

Wed, 02/19/2014 - 20:07 | 4454931 asteroids
asteroids's picture

Today probably marks the TOP. History will look back at the FB deal as incredibly stupid.

Wed, 02/19/2014 - 21:23 | 4455220 nothing can go wrogn
nothing can go wrogn's picture

It may look stupid to us, but when you're in the club. It's win-win. Guys like Bezos, and Zuckerberg are certified club members. Amazon doesn't need to make money, and Facebook doesn't need a business model. That's not going to stop them from being billlionaires though. Hell no.

Some day long in to the future, we'll probably learn of some obscure Federal Reserve lending program that kept the club member tech companies flush with fresh fiat.

Wed, 02/19/2014 - 21:43 | 4455289 johnQpublic
johnQpublic's picture

never heard of either of these companies

Thu, 02/20/2014 - 02:02 | 4456224 Four chan
Four chan's picture

oi vey!

Thu, 02/20/2014 - 05:14 | 4456467 gold-is-not-dead
gold-is-not-dead's picture

WTF is 'whatsup' and why is it 16 billions? Someone in FB sniffed glue apparently.

Wed, 02/19/2014 - 20:11 | 4454932 TruthInSunshine
TruthInSunshine's picture

@camaro - you can get in at the ground floor on my new tech company called "Ow! My Balls!"

It's a multiplayer game app that electrically shocks the balls of anyone getting a trivia question wrong.

I started it with $1,800 in my basement and already turned down an offer of 800 million USD from Yahoo.

Google or Facebook will give me 10 or 30 billion USD for it by next August.

Wed, 02/19/2014 - 21:41 | 4455282 Paveway IV
Paveway IV's picture

Boring name. You need something more contemporary. How about some Asian flair?  O-me-ba! (I hope that doesn't mean something bad in Chinese)

Wed, 02/19/2014 - 21:45 | 4455298 johnQpublic
johnQpublic's picture

'batin roulette

Thu, 02/20/2014 - 01:43 | 4456178 TheRideNeverEnds
TheRideNeverEnds's picture

you should have bought the dip while you had the chance.

Wed, 02/19/2014 - 18:59 | 4454672 fonzannoon
fonzannoon's picture

dup

Wed, 02/19/2014 - 19:21 | 4454780 monad
monad's picture

320 million fake accounts

You've been faceplanted again!

Wed, 02/19/2014 - 19:42 | 4454864 lynnybee
lynnybee's picture

I've never heard of WhatsApp. .... I have WHATSAPP on my cell phone.  WHATSAPP is very popular in the Middle East with the young people.  the Saudi gov't keeps threatening to ban WHATSAPP along with SKYPE app. 

http://rt.com/news/saudi-arabia-message-censorship-122/

Wed, 02/19/2014 - 22:04 | 4455391 laomei
laomei's picture

Here's what it comes down to in reality, and why these buyouts will be allowed forever. Facebook can have shit ad revenue and it doesn't matter.  What matters in the end is the centralized data collection.  They want everything and they hand it over to the NSA.  In return for that, they get full support when it comes to litigation and buyouts.  It's happened before, where there was legit competition which Facebook blatantly ripped off and refused to be bought out or die and go away.  Facebook simply sues them over bullshit, and magically wins, forcing the (mostly foreign) competition under.  Facebook, as a part of this, gets really easy patents, a lot of which are pure bullshit, why? Because they hand over everything to the NSA, and for the CIA, this is basically a bunch of the world voluntarily spying on themselves and revealing all their little networks.  It's gotta be just about the dumbest fucking thing in the world for anyone sane to submit to, and it's a major reason why it's blocked in China.  

Sat, 02/22/2014 - 01:34 | 4464438 matrix2012
matrix2012's picture

"It's happened before, where there was legit competition which Facebook blatantly ripped off and refused to be bought out or die and go away.  Facebook simply sues them over bullshit, and magically wins, forcing the (mostly foreign) competition under. "

 

@ laomei, may you please name the name(s)

Thu, 02/20/2014 - 04:24 | 4456437 dark pools of soros
dark pools of soros's picture

probably 20million and 300mil fake 'user farms' accounts to pump up the valuations..

 

users are the new clicks... totally gamed

Thu, 02/20/2014 - 12:31 | 4457614 The Mist
The Mist's picture

Everybody in Europe with a smartphone uses WhatsApp nearly daily.

The users are definitely not 'fake'.

That doesn't mean it's worth 19 billion, but I can't stand the idiots here just talking trash without knowing shit.

Wed, 02/19/2014 - 18:40 | 4454625 cossack55
cossack55's picture

Throw in Japan and its a deal.

Wed, 02/19/2014 - 18:40 | 4454630 HedgeAccordingly
HedgeAccordingly's picture

Audio listen to this from BBG lol - 16 billion is about 15billion too much if you ask me..” …http://hedge.ly/NbXELZ

Wed, 02/19/2014 - 18:41 | 4454633 fonestar
fonestar's picture

FACEBOOKD!!!!!!!!!!!!!!!!!!!

Wed, 02/19/2014 - 19:09 | 4454736 silverserfer
silverserfer's picture

look its kermit from the railyard he speaks!

Wed, 02/19/2014 - 22:03 | 4455388 johnQpublic
johnQpublic's picture

BIT coined!

Thu, 02/20/2014 - 04:24 | 4456438 dark pools of soros
dark pools of soros's picture

Facebroke

Wed, 02/19/2014 - 20:26 | 4454995 seek
seek's picture

So true, TruthInSunshine, I think I've seen a total of one post so far in 2014 from a collection of a half-dozen teens. FB is dead.

Thu, 02/20/2014 - 01:49 | 4456187 StychoKiller
StychoKiller's picture

You left out JCP, Sears & Kmart -- was that intentional?

Wed, 02/19/2014 - 18:39 | 4454620 Theta_Burn
Theta_Burn's picture

The header could have stopped right after "Facebook Blows" we'd have gotten the joke....

 

Wed, 02/19/2014 - 18:39 | 4454622 max2205
max2205's picture

This is so 2000.....100% plus 2 years before this "market' bitch blows up....sorry you will have to wait

Wed, 02/19/2014 - 18:42 | 4454636 aVileRat
aVileRat's picture

Seriously: what the fuck do the bankers and board of directors do at the meetings when Zuckerberg & Sandberg pitch this crap.

There is overpaying for a company, and then -------> waaaay over at the other end of the leaguetable is Zuck-premiums. This is well beyond Mary Meeker lvl bullshit. Someone needs to reign the kid in, maybe explain to him the whole concept of building it yourself vs. buying your way out of problems. At 200x PROJECTED Revenues, this is not even close to making sense.

 

Wed, 02/19/2014 - 18:47 | 4454656 TruthInSunshine
Wed, 02/19/2014 - 22:57 | 4455631 Vice
Vice's picture

How DARE you post an article written by Cramer the infamous retard

Thu, 02/20/2014 - 03:49 | 4456392 Scarlett
Scarlett's picture

Well done, TIS.  Beautiful.

Wed, 02/19/2014 - 19:20 | 4454774 zaphod
zaphod's picture

I'd bet my life savings that most of Facebook's BOD had shares in this no name startup. At that level its just an inner circle jerk where the same small number of people pass shares around and that decides who wins and who loses. 

Don't believe me? Just look at Google, when they started they were 1 of 30 companies doing the exact same thing. The difference? Google's early angles/VCs passed shares around for free to all the other well connected bay area cronies, that is what make Google rise up while the other 30 fell back. 

I used to believe the US was a free market, but it's become obvious that is not the case. 

Wed, 02/19/2014 - 20:13 | 4454947 jbvtme
jbvtme's picture

as regards google success...don't forget the fumble in the endzone by goto.com later overture.com later yahoo

Thu, 02/20/2014 - 03:58 | 4456402 Scarlett
Scarlett's picture

You're mistaken.  Google had a better algorithm than the altavistas of the christmas past.

Wed, 02/19/2014 - 18:45 | 4454647 Jannn
Jannn's picture

The World Gold Council Clueless on Chinese Gold Demand?

 

http://www.ingoldwetrust.ch/world-gold-council-clueless-on-chinese-gold-...

Wed, 02/19/2014 - 19:12 | 4454748 game theory
game theory's picture

The deeper irony (besides a quote from fight club) is that these guys sold their company to FB whose only means of monetization is...wait for it...selling ads (ok...and selling databases to the NSA). Thus, the "founders' story" is revealed to be total crap.

Still, I don't understand what is propping up the FB stock price anymore.   Aside from having one of the largest global facial recognition databases which average people worldwide seem perfectly willing to keep adding to, their advertising just isn't all that effective.

Wed, 02/19/2014 - 19:49 | 4454880 lakecity55
lakecity55's picture

It's being propped up by a venture capital firm in VA called 'cia operations.'

Your taxes have helped, and are appreciated!

Wed, 02/19/2014 - 19:47 | 4454874 RmcAZ
RmcAZ's picture

So, how does this WhatsApp (which I've never heard of in my life despite working in IT and always having the latest tech) actually make money? I see their app is free and there are no ads... Did they adopt the Amazon method of wealth generation? (Moar losses = moar money?)

Thu, 02/20/2014 - 04:00 | 4456408 Scarlett
Scarlett's picture

>> their app is free 

 

It's $1.00

Thu, 02/20/2014 - 12:35 | 4457639 The Mist
The Mist's picture

Free in Google Playstore.

Wed, 02/19/2014 - 18:36 | 4454607 Max Damage
Max Damage's picture

I call market top with such an overpriced dumb aquisition. Either that or FED prints MOAR to let FB pay for it!!!!!

Wed, 02/19/2014 - 18:38 | 4454615 RaiZH
RaiZH's picture

I'm hoping the stupdendous amount of money Jan Koum makes out of this, does not go towards Molotov Cocktails.

Wed, 02/19/2014 - 18:38 | 4454616 jubber
jubber's picture

how many of those 320 million users are already FB users? I would have thought...320 million?

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