The failed $3 billion Snapchat offer has nothing on this…
Facebook is acquiring WhatsApp for a total value of $19 BILLION.
The deal was announced by Facebook in a blog post. The $19 billion is split up into three parts:
- $4 billion in cash
- $12 billion in Facebook shares
- $3 billion in restricted stock units for Whatsapp employees, to be distributed over four years
WhatsApp currently has 450 million users, with around 1 million new users per day. 70 percent of these users are active on a daily basis. WhatsApp’s message volume is supposedly close to the entire global volume of SMS messages. Facebook is essentially paying about $42 per user.
WhatsApp’s Co-Founder and CEO, Jan Koum, will join Facebook’s Board of Directors.
If the merger isn’t approved by the SEC for whatever reason Facebook will pay Whatsapp $1 billion in cash and $1 billion is stock.
Will this go down as the worst business decision ever?
Damn, you could buy a lot of MP3 downloads with that much dough!
Why will this go down as the worst business decision ever?
While it is a lot of money, the estimates are the this is actually a good deal. A couple key points:
Consider that the app will hit the one billion user mark next year and they charge $1 per year subscription fee. That’s an additional $1b per year in revenue, not to mention the benefit to Facebook.
Next, look at the subscribership to Facebook compared to Whatsapp. Facebooks is strongest in North America, while Whatsapp is stronger in Europe, Latin America and India. These are areas where FB is trying to grow.
Lastly, the app helps solidify mobile devices being an integral part of lifestyles which helps FB moving forward.
I noticed that $0.99 a year charge hovering in the background of my WhatsApp account. Nobody that I know is paying for WhatsApp, and I think they will seriously damage that billion user number if they force payment after a year.
So, maybe it has to be an upgrade of some sort, but upgrade to what? You can already use WhatsApp for everything you need, for example, layering audio (and I think video) clips. Of course, a certain percentage of that billion will pay, but what percentage? 1% maybe?
I’m not doubting that there could be a monetization moment, I’m just not seeing it though the ‘after one year’ plan.
No, the worst business decision(s) ever were made by the major labels. Too many superfuckups to count.
Here’s something that hasn’t been discussed much by this blog.
People always say that streaming is cannabilising sales. But it appears to me what has cannabilised sales is actually apps.
Look at iTunes Store – way more sales of apps then music.
People have limited $ to spend and they’ve chose to spend their 99c on apps instead of songs.