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Facebook Acquires WhatsApp for $19 BILLION


Stashed in: Mobile!, Facebook!, Zuck!, @mcuban, Sequoia, @hunterwalk, Billions!, Awesome, The Matrix, @semil, Russia and Friends, FB, Active Users, Snapchat, 2014, fun!, WhatsApp, facebook, WhatsApp!, Facebook Acquisitions

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I could hardly believe this price!!!

Crazy... What's the number of users do they have?...

According to the Wall Street Journal:

WhatsApp’s 450 million active users are being bought by Facebook for a modest $42 each. That’s more than the $30 per user Facebook paid when it bought Instagram and its 33 million users for $1 billion back in 2012. 

Facebook currently boasts 556M mobile daily active users, and WhatsApp alone already has over half of that at 350M.

I suspect there is a significant overlap between FB users and Whatsup users. So I'm no sure how many users did FB actually buy?

There's not a significant overlap. Every second spent in WhatsApp is spent AWAY from Facebook.

So all the time spent on WhatsApp by its users will now be additive to Facebook's overall engagement.

This is how Facebook will grow to 2 billion users before any other company.

I think there should be remake of the Matrix movie. 

Now, instead of working in some life sucking corporate jobs (like Neo in the beginning of the movie), the Matrix-ed population will just be spending all their time on social platforms :)

Once Neo finally gets to the magic door, instead of the gray-headed guy in a suit, he will meet a dude in flip flops and a hoodie.

It kind of makes you want to give up social platforms, doesn't it?

Why? 

i.imgur.com

Ignorance is Bliss gif imgur

By the way, all WhatsApp development was done in Russia:

http://pandawhale.com/post/22135/250-million-people-use-whatsapp-every-month

Ehh, I wish there is more info in Russia part. Problem with outlets like businessinsider and forbes that they are, pretty much, gossip publications. With no journalistic ethics, they publishing some vague references. It might be the case, that they hired few geeks in Russia, but I doubt one can build a $19bln company running an offshore shop.

Here is the post from Quora:

http://www.quora.com/WhatsApp-Messenger/How-strong-is-the-engineering-team-at-WhatsApp

Anecdotally, I can say that the Facebook Messenger team was baffled by their incredibly low latency and was attempting (unsuccessfully) to compete with it. Given that they were determined to out-compete Whatsapp just a few months ago, I have to imagine some heads were rolled as a result of this acquisition.

I suspect the trick is that Russia still got some people willing to use C.

I suspect that, too.

And you're right that this does not mention any development in Russia: "Looking at their Linkedin profiles, they are pretty near the top. They also seem to hire mostly very experienced people and few if any fresh grads."

Then again, the Russian and Ukrainian developers would not necessarily be on LinkedIn, right?

Forbes does say Igor Solomennikov was hired off of RentaCoder.com.

In terms of cheap talent in Russia...:) Something tells me that the guys, smart enough to build an app like this might be smart enough to calculate their market rates $$$?

There still will be total geeks, who are not even willing to bother about money, but this is quite rare and managing these people remotely is quite impossible. Pretty soon there will be a local "agent", who will take care of adjusting the price. 

Yeah, that makes sense.

It's hard enough to find good engineers; when you do find them it makes sense to pay them well.

UNBELIEVABLE:

WhatsApp for an incredible $19 billion dollars: $12 billion in stock, $4 billion in cash and another $3 billion in restricted stock units.

At last count of the company’s 55 staff, that’s a cool $345 million per employee.

It's a big, bold bet by Facebook to wager a significant amount of their cash on WhatsApp's continued success.

To put this in context: That's 19 times what they paid for Instagram. It's 19 Instagrams.

WhatsApp was valued at $1.5 billion by Sequoia in July 2013:

http://techcrunch.com/2014/02/21/whatsapp/

Three thoughts come to mind:

1. Now I see why Yahoo could not buy WhatsApp -- too expensive. But what's Google's excuse?

2. Facebook buying Instagram for $1 billion looks like a huge bargain two years later.

3. WhatsApp has refused advertising, but Facebook's model is advertising... what's gonna give?

"A good founder plays where the Zuck is. A great founder plays where the Zuck is going to be."

Source: https://twitter.com/StartupLJackson/status/436267503761645569

In response to "What's Google's excuse?"

Fortune: Google bid $10B for WhatsApp • 7:15 AM

  • Google (GOOG) offered to acquire WhatsApp for $10B, Fortune reports.
  • While the figure is far less than the $19B Facebook is paying, there's no word on whether it would have been in cash and shares, or all in cash - Facebook is paying "just" $4B in cash.
  • Unlike with Facebook, Google's bid for WhatsApp also didn't come with the offer of a board seat.

Source:  Seeking Alpha

Would they have really wanted a Board seat?

Wow, Google's $10 billion seems so generous and yet so much less than Facebook was willing to pay.

I wonder if Google was surprised that WhatsApp did not ask them to bid higher.

Looks like Sequoia made $6.4 billion from its investment of $8 million:

http://www.businessinsider.com/how-much-sequoia-made-on-whatsapp-2014-2

Google would have outbid Facebook:

http://www.businessinsider.com/google-whatsapp-2014-2

Matt Yglesias says offering a Facebook board seat is meaningless:

Zuckerberg, by contrast, has the ability to hash out an acquisition price casually “over chocolate covered strawberries” that were originally intended as a treat to be shared with his wife. He even gave WhatsApp CEO Jan Koum a seat on the board. And why not? The board is meaningless anyway. Once the deal is sealed, WhatsApp will be part of Facebook, and as such, it will be 100 percent under Zuckerberg’s control.

Contrast that with some other things Facebook could do with $19 billion. A special dividend, for example. If Facebook were to flush a bunch of cash out to shareholders, Zuckerberg wouldn’t get 100 percent of it. He wouldn’t get 57 percent of it either. He’d get about 28 percent of the money, reflecting his slice of the overall Facebook stock pie.  

That’s nothing to sneeze at, obviously. But 28 is a lot less than 100. And it points to a serious problem for Facebook’s shareholders. It means that from the standpoint of the founder, CEO, and controlling shareholder, $1 invested in making Facebook larger is worth a lotmore than a dollar put into the pockets of shareholders. Whenever Facebook spends money buying another company, Zuckerberg personally controls the entire company that got purchased. If Facebook decided to kick that money out to shareholders instead, Zuckerberg would get only a fraction of the cash. That means Facebook is going to be systematically biased in favor of investing too much and acquiring too much, while kicking out too little to shareholders.

Here's what the Valley looks like today:  

Bug Eyed Fisherman

19 with a B?

And here's what it looks like at Sequoia:

counting money forever gif

Hundred dollar bills, yo!

Btw Facebook rejected one of the founders in 2009:

Facebook Rejected WhatsApp Co-Founder Brian Acton For A Job Back In 2009 - Business Insider

TechCrunch offers more context:

Facebook has posted on its blog, detailing the reasoning behind the acquisition as well. The post notes that WhatsApp will continue to operate independently and retain its brand. In addition,. WhatsApp co-founder and CEO Jan Koum  will join Facebook’s board.

Facebook notes that WhatsApp has over 450M MAUs, with 70% of those active each day. In a staggering comparison, Facebook also notes that the messaging volume of WhatsApp approaches the SMS volume of the entire global telecom industry — and that it’s adding 1M users a day.

“WhatsApp is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable,” said Mark Zuckerberg, Facebook founder and CEO in a statement.

“WhatsApp had every option in the world,” Zuckerberg continued in a post to his Facebook page, “so I’m thrilled that they chose to work with us. I’m looking forward to what Facebook and WhatsApp can do together, and to developing great new mobile services that give people even more options for connecting. I’ve also known Jan for a long time, and I know that we both share the vision of making the world more open and connected. I’m particularly happy that Jan has agreed to join the Facebook board and partner with me to shape Facebook’s future as well as WhatsApp’s.”

Jan Koum, WhatsApp co-founder and CEO, said, “WhatsApp’s extremely high user engagement and rapid growth are driven by the simple, powerful and instantaneous messaging capabilities we provide.”

Facebook specifically calls out its deal with Instagram as a template for how it will deal with WhatsApp:

Facebook fosters an environment where independent-minded entrepreneurs can build companies, set their own direction and focus on growth while also benefiting from Facebook’s expertise, resources and scale. This approach is working well with Instagram, and WhatsApp will operate in this manner. WhatsApp’s brand will be maintained; its headquarters will remain in Mountain View, CA; Jan Koum will join Facebook’s Board of Directors; and WhatsApp’s core messaging product and Facebook’s existing Messenger app will continue to operate as standalone applications.

In a post on the WhatsApp blog, Koum elaborates on that:

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.

The note about no advertising is interesting, as that’s obviously Facebook’s primary method of monetization on its main platform — and now Instagram. WhatsApp will also keep its subscription fees, which amount to $1 per user after the first year of use.

WhatsApp investor Sequoia has also posted up some information about the acquisition, specifically its very large valuation. The company notes that it only has 32 engineers — making the ratio 1 engineer to every 14 million users. It processes 50 billion messages a day across 7 platforms.

Those are some fine numbers by Sequoia, btw.

So now we know:

1. Mark Zuckerberg personally has been cultivating his relationship with Jan Koum for some time.

2. Facebook still sees its primary mission as "making the world more open and connected".

3. Nothing will change for WhatsApp users. No advertising. WhatsApp will stay independent.

4. WhatsApp's goal is nothing short of making WhatsApp available to everyone in the world.

I have no idea how Facebook plans to monetize, but maybe this is just something strategic -- they don't need to monetize via WhatsApp; they just need to keep WhatsApp out of the hands of other companies.

They got screwed Geocities went for 4 billion in 1999!

Who got screwed? Facebook, WhatsApp, Yahoo, or Geocities?

Whatsap! #sarcasm.   Who really gets screwed are passive index investors that buy Bubbles every month. 

Heh, this is far removed from that. More comparison at today's close:

Twitter is worth $30 billion.

LinkedIn is worth $23 billion.

And WhatsApp is worth $19 billion.

On Jan Koum's desk:

no ads no games no gimmicks WhatsApp Facebook

Hopefully he convinces Facebook to get rid of the bad ads.

I love this part of the NYTimes DealBook piece:

On Feb. 9, Mr. Zuckerberg  asked Mr. Koum over to dinner at his home, where he formally proposed a deal. Mr. Koum thought about it for a few days, and the two men met again last Friday.

Mr. Koum came over to Mr. Zuckerberg’s home, crashing the dinner Mr. Zuckerberg was sharing with his wife, Priscilla Chan. The two men entered into negotiations, eating a plate of chocolate covered strawberries intended for Ms. Chan, the people briefed on the matter said.

By last weekend’s end, the two men had struck a deal.

http://dealbook.nytimes.com/2014/02/19/facebook-to-buy-messaging-start-up/

What?! They ate Zuck's romantic Valentine's gift to his wife??? Geez!

hey, hun. sorry, to keep you waiting. we ate your valentine's day present and i spent $19bil. we still cool?

I laughed out loud!

There's a children's story book idea in there somewhere, Emily. 

i'll bet they were playing chubby bunny with the chocolate covered strawberries.

There's a mental image!

I thought that chubby bunny only works with marshmellows?

marshmallows are preferred.  ;)  but i had tears of laughter when i pictured those two guys, on valentine's night, stuffing their faces in the kitchen with the wife's chocolate-covered strawberries until they can't say "chubby bunny" anymore!

then striking a $19,000,000,000 deal.

The largest deal for a venture capital backed company in history. 

You're right that it borders on absurd. 

I hope Zuck made it up to Priscilla. 

I'd like to believe they have a normal relationship.

"WhatsApp is now owned by one of the largest data-mining operations in human history."

Source:

http://valleywag.gawker.com/put-the-snapchat-co-founders-on-suicide-watch-facebook-1526317040

The best minds of my generation are thinking about how to make people click ads:

http://www.businessweek.com/magazine/content/11_17/b4225060960537.htm

Forbes says Solomennikov, who posted the photo below, was hired off of RentaCoder.com. It sounds like he might have been their first engineer—brought on before the company had been incorporated or the app was written:

"Jan was showing me his address book," recalls Fishman. "His thinking was it would be really cool to have statuses next to individual names of the people." The statuses would show if you were on a call, your battery was low, or you were at the gym. Koum could do the backend, but he needed an iPhone developer, so Fishman introduced Koum to Igor Solomennikov, a developer in Russia that he'd found on RentACoder.com.

Today he was sipping cristal:

WhatsApp Developers Are Celebrating With Boxes of Cristal

It was a deal two years in the making, according to a source close to the situation:

Facebook CEO Mark Zuckerberg first called Whatsapp CEO Jan Koum in the spring of 2012.

A month after the call, the two went out for coffee in Los Altos. They went on a hike.

Despite Zuckerberg's wooing, the deal didn't happen.

But the two stayed in touch. There were dinners and a lot more hikes.

There were three reasons Zuckerberg was so fascinated with Whatsapp:

  • He's confident it's going to reach 1 billion users in no time. Even with 450 million monthly active users, WhatsApp's growth rate is faster than Facebook, Instagram, Skype, or Gmail.

  • Of those 450 million monthly active users, 70% come back every day. That's a stickiness that is unheard of. Zuckerberg is proud that Facebook is among the stickiest ever, and only 62% of its user come back every day.

  • Zuckerberg looked at other products as popular as he expects Whatsapp to be: Tencent, Google search, YouTube, Facebook. They are all extremely valuable.

So Zuckerberg stayed on Koum. 

Finally, on Feb. 9, 2014 he had Koum over for dinner at his home. He proposed the merger. Zuckerberg said to him: Let's connect the world together. He said that this would not be an ordinary startup acquisition – it would be a partnership. He said he wanted to put Koum on Facebook's board.

Koum thought about it for a couple days.

Then, last Friday — on Valentine's — Koum came over to Zuckerberg's house. Interrupting Zuckerberg's Valentine's dinner with his wife, Priscilla, Koum said yes, he wanted to do the deal. The two hammered out pricing and terms over chocolate covered strawberries.

As someone who paid for WhatsApp but never uses it, I'm amazed Facebook would pay that much.

It's one of the biggest corporate acquisitions in history.

WhatsApp Usage Versus Line And WeChat - Business Insider

Why Facebook Bought WhatsApp - Business Insider

Why Facebook Bought WhatsApp - Business Insider

Why Facebook Bought WhatsApp - Business Insider

Why Facebook Bought WhatsApp - Business Insider

Why Facebook Bought WhatsApp - Business Insider

Why Facebook Bought WhatsApp - Business Insider

Asked why he bought WhatsApp, Zuckerberg says he's looking 5-10 years ahead:

Facebook would not run ads on WhatsApp.

Analysts asked a few questions about revenues and monetization — and were disappointed. WhatsApp already has a revenue stream (it requires a subscription, eventually) but that is not the point.

Rather, the company paid $19 billion — a staggering sum by any reckoning — because it is buying the future of smartphones. There are about 1 billion smartphones in the world right now, Zuckerberg and WhatsApp CEO Jan Koum said, and in five or 10 years there will be 5 billion. Messaging will be the No.1 activity on those phones, the pair believe, just as it is now.

"It's the only app we've ever seen with higher engagement than Facebook itself," Zuckerberg said.

Here are all of the S&P 500 companies that are worth less than WhatsApphttp://qz.com/179047/here-are-all-of-the-sp-500-companies-that-are-worth-less-than-whatsapp/

Holy smokes, there are 275 companies in the S&P 500 worth less than WhatsApp!

Heck, Blackberry is worth 20% of WhatsApp. 

Hoo ah:

Activison-Blizzard – $13.9B
Alcoa – $12.2B
American Airlines – $12.3B
Akamai – $10.9B
AmerisourceBergen – $15.9
Blackstone Group – $17.8B
Campbell Soup – $13.6
Chesapeake Energy – $17.2B
Chipotle – $17.1B
Citrix Systems – $10.7B
Coach – $13.5B
Consolidated Edison (ConEd) – $16.2B
Discovery Communicatons – $19.1B
Dr. Pepper Snapple Group – $10.2B
Expedia -$10.2B
The Gap – $19B
Fidelity – $15.8B
Harley-Davidson – $14.1B
Hertz – $11.5B
Icahn Enterprises -$13.1B
The J.M. Smucker Company – $10B
Kohl’s – $11.1B
Kroger – $19.4
Loews – $17B
Macy’s – $19.6B
Marriott International – $15.4B
Mattel – $12B
MGM Resorts – $12.7
Monster Beverage – $12B
Moody’s – $17.08B
News Corp – $10.27B
Nielsen – $17.6B
Nordstrom – $11.4B
Progressive – $14.3B
Ralph Lauren – $14.2B
Red Hat – $11.1B
Royal Caribbean Cruises – $11.4B
Ryanair – $15.5B
Sherwin-Williams – $19.4B
Southwest Airlines – $14.7B
Starwood Hotels & Resorts – $14.9B
Symantec – $14.4B
TD Ameritrade – $18.4B
The Carlyle Group – $11.1B
Tiffany & Co. – $11.4B
Tyson Foods – $13.1B
Under Armour – $11.4B
Whole Foods Market – $19.3B
Workday – $17B
Xerox – $13.2B

Here are the biggest M&As on record for venture-backed companies, according to VentureSource:

1) Continental Cablevision — $11.8 billion, by US West Media, in 1996

2) Skype Technologies SA — $8.5 billion, by Microsoft, in 2011

3) Cerent — $6.9 billion, by Cisco Systems, in 1999

4) WebMD — $4.8 billion, by Healtheon, in 1999

5) Chromatis Networks — $4.76 billion, by Lucent Technologies, in 2000

6) Siara Systems — $4.5 billion, by Redback Networks, in 2000

7) Sirocco Systems — $3.49 billion, by Sycamore Networks, in 2000

8) Hyperion Solutions — $3.3 billion, by Oracle, in 2007

9) Xros — $3.23 billion, by Nortel Network, in 2000

10) Nest Labs Inc. — $3.2 billion, by Google, in 2014

So yeah, this was the largest venture backed acquisition in history. 

http://techcrunch.com/2014/02/20/business-as-usual-in-the-new-silicon-valley/

450 million users of ANYTHING is worth a lot. 

LA Times article by Jessica Guynn on Facebook buying WhatsApp is their cover story today:

http://www.latimes.com/business/la-fi-tech-valuations-20140221,0,4041429.story

Hey, you're quoted!

Yes I'm quoted Geege -- good catch!

WhatsApp With Facebook? (Comic) | Re/code

How Facebook employees feel about the WhatsApp deal:

http://www.businessinsider.com/facebook-employees-whatsapp-acquisition-2014-2

Telegram saw 8m downloads after WhatsApp got acquired and now it's the #1 messaging app in the AppStore:

http://techcrunch.com/2014/02/24/telegram-saw-8m-downloads-after-whatsapp-got-acquired/

“The No. 1 reason for me to support and help launch Telegram was to build a means of communication that can’t be accessed by the Russian security agencies, so I can talk about it for hours,” Durov tells me, adding that he stands by the app’s claim that its encryption is the most superior available, despite Hacker News threads to the contrary.

What I love about WhatsApp is that they really seem to be in it for the mission, not the money:

http://pandawhale.com/post/37916/the-rags-to-riches-tale-of-how-jan-koum-built-whatsapp-into-facebooks-new-19-billion-baby

The mission being to bring affordable texting to every single person in the world.

Mark Zuckerberg make it rain gif Zuck Dawg WhatsApp Imgur

Mark Zuckerberg makes it rain gif Imgur

WhatsApp Was Valued At ~$1.5B In Final Round Before Sale | TechCrunch

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