WhatsApp Doc? Facebook Buys WhatsApp for $19 Billion

Hola Todos!

Shocker…$19 billion is A LOT of money. However, this is a great call from Facebook.  After doing a little digging in the blogosphere and thinking about this a bit more, Facebook is not just a social juggernaut, it has become the social juggernaut.

Now for few numbers: the deal was $4 billion is cash, $12 billion in stock, and $3 billion in restrictive stock unit shares that will vest over time to the 32 engineers – think of this as retention bonuses. (Yes, there are just 32 individuals, who are now all multi multi millionaires, who work at this firm). WhatsApp has over 450 million active daily users worldwide (most of which are outside the US).  That’s double Twitter’s active user base.  Moreover, 9 months ago, WhatsApp announced the service had over 200 million active daily users, which was more than Twitter then, and of course, now.  Shockingly, that also means WhatsApp is growing three-times faster than Twitter (and everyone else for that matter).  Could Facebook and WhatsApp be the only two social networks in the world with a billion users in 2015? I think so….

What does this all mean:

-Facebook + Instagram + WhatsApp = the 800 lb gorilla of social media

-WhatsApp is almost all mobile and mostly international – two HUGE wins for Facebook that has strong growth in both but dominate in neither (until now)

-I wonder what it will be like to go to work at SnapChat this morning when they just turned down $3 billion from Facebook this month – could someone overreact in the next week and back a truck load of money to their doorstep?

-As for losers: Google (who has been trying to buy WhatsApp for months), Yahoo (who does not have a business that is growing at scale and is also weak in mobile AND global)

-And the biggest loser of all?  Another (or the final) nail in Blackberry coffin? – Blackberry invented the global messaging category and now they are watching others make billions

-This is NOT a “bet the farm” deal for Facebook.  It is an aggressive deal for sure but Wall Street likes aggressive deals and I believe the stock will pop today.  Think about it and their current market cap – this is just $4 billion in cash and the rest in stock.  YOU CANNOT build a business with 450 million active users and growing at 3X at almost any price

-I have a feeling that this deal is going to change the culture in the valley from cautious VC money growth and IPO (like Twitter) to big time deals and M&A (like this deal)

-This reminds me of the YouTube deal way back when at $1.6 billion.  That was A LOT of money but it was all stock (Google’s evaluation when up more than $5 billion in the week after the deal) and Google picked up the dominate player in a category that Google was an “also ran.”

As always, here’s a bunch of cool links to check out:

The four numbers to what made this deal happen

-Facebook overcoming their mobile stumble of Home…priceless

A short overview video with nice background on the mobile messenger players

That’s a lot to think out today but today is not any ordinary day…

 

Best regards,

Dr. Dan-o

 

Daniel M. Ladik, Ph.D.,

 

Associate Professor of Marketing

Stillman School of Business

Seton Hall University

One thought on “WhatsApp Doc? Facebook Buys WhatsApp for $19 Billion

  1. Great analysis straight to the core of the matter; Thanks Dr. Dan-o for this not so marketing but rather financial perspective on this move from Facebook.

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