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!