WhatsApp: 2nd Biggest Tech Acquisition of All Time 257
Nerval's Lobster writes "Facebook CEO Mark Zuckerberg decided to drop a cool $16 billion on WhatsApp, a messaging service with 450 million users. It was a mind-boggling sum, even if you buy into Facebook's argument that WhatsApp (which will continue to operate as an independent subsidiary, at least for the moment) will soon connect a billion people around the world. But it wasn't the biggest tech acquisition of all time: that honor belongs to Hewlett-Packard, which bought Compaq for (an inflation-adjusted) $33.4 billion in 2001. Facebook's purchase of WhatsApp comes in second on the list, followed by Hewlett-Packard's purchase of Electronic Data Systems for $15.4 billion; Google's acquisition of Motorola Mobility for $13 billion, and Oracle snatching up Peoplesoft for $12.7 billion. In sixth comes Hewlett-Packard again, with its Autonomy buy in 2011 (for $11.7 billion), followed by Oracle's BEA Systems acquisition ($9.4 billion) and Microsoft seizing Skype ($9.0 billion). What do many of these highest-cost purchases have in common? Many of them didn't pan out. Hewlett-Packard's Compaq, Autonomy, and EDS acquisitions, for example, made all the sense in the world on paper, the tech giant eventually took significant write-downs on all three (Autonomy in particular was an outright disaster, resulting in a $8.8 billion write-off and widespread allegations of financial and management impropriety)."
Update: 02/20 19:32 GMT by T : Of interest: Mother Jones has an interesting take on the seeming mismatch between Facebook's business model and the way the WhatsApp founders think about advertising. Hint: they hate it.
2d biggest? (Score:5, Informative)
Did they mean "2nd biggest"?
Why not just write "Second biggest"?
Re:2d biggest? (Score:5, Funny)
Re:2d biggest? (Score:4, Funny)
Re:2d biggest? (Score:4, Funny)
Did they mean "2nd biggest"?
Why not just write "Second biggest"?
There's a patent on that.
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They could have tried "2th biggest" as a workaround.
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Did they mean "2nd biggest"?
No, since it's all about the combined surface area of screens they meant is 2d.
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Did they mean "2nd biggest"?
Why not just write "Second biggest"?
The purchase is only on paper...
thus, 2d!
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Well, thank you for your 1/6 of a shilling.
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Well, this site agrees with you: http://grammar.about.com/od/mo... [about.com]
"Write out ordinal numbers when they contain just one word: third prize, tenth in line, sixtieth anniversary, fifteenth birthday. Use numerals for the others: the 52nd state, the 21st Amendment."
(But they also say:
"Do not use the ordinal (th, st, rd, nd) form of numbers when writing the complete date: January 15 is the date for the examination. However, you may use the ordinal suffixes if you use only the d
CNN argues it's worth the money (Score:5, Interesting)
http://money.cnn.com/2014/02/2... [cnn.com]
But I will not tech history in the last 20 years is littered with companies that were bought because of instant messaging in one form or another, stuff like Skype, that later on did not really bring it's parent company anything (eBay sold skype to Microsoft at a loss iirc).
The problem seems to be how to integrate and monetize these services without people jumping ship. Until then, they are hosting a free service that's quite a bit to fund with no obvious revenue stream in sight other than ads.
Of course, Facebook is an expert on that, so it may turn out well for them. Still, amazing returns on a 4 year old company.
Re:CNN argues it's worth the money (Score:5, Insightful)
Skype? Hah. Remember ICQ?
The funny thing is Facebook bought for billions a company which makes software running over XMPP. THAT was pathetic.
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The funny thing is Facebook bought for billions a company which makes software running over XMPP.
Now that they have plenty of cash, what refrains the WhatsApp founders from starting over a concurrent application ? Especially if Facebook begins to do the evil things that WhatsApp didn't want to do (store messages, sell ads, etc...) ?
Re:CNN argues it's worth the money (Score:5, Informative)
Non-compete clauses in the contract which says they have to give all the money back is my guess.
If you're buying a company, you pretty much try to lock up the top people to ensure they can't say "piss on you, I'll just make it again".
When you sell the company, you also sell the IP -- and then they can pummel you for stealing 'their' idea.
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When you sell the company, you also sell the IP -- and then they can pummel you for stealing 'their' idea.
Remember mysql and MariaDB ?
Same (potential) situation here : there is no IP in WhatsApp. Just an excellent execution of well-known idea.
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Now that they have plenty of cash, what refrains the WhatsApp founders from starting over a concurrent application ?
$3billion in retention bonuses.
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Re:CNN argues it's worth the money (Score:5, Insightful)
They didn't pay $19 billion for the app. They paid for the userbase. From what I read it's about 450 million, which would make the purchase price about $42 per user. A little steep, but not outlandish in advertising terms. Now they have to figure out how to hang on to those users and grow the user base.
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You're right, but I still don't think it's a smart purchase, since I don't really see a method to hang on to those users other than, "providing good service". Insofar as Facebook is capable of doing that, they could have stolen the users without buying the company.
Re:CNN argues it's worth the money (Score:4, Insightful)
no, it isn't pathetic. what facebook bought was a large userbase. same goes for microsoft with skype, rakuten with viber, etc.
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Does that userbase overlap with the Facebook userbase? Can you get $42 per person? Can it not the easily displaced by something else? Skype actually developed meaningful things like the SILK codec. What did these bozos develop?
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Who cares about people jumping ship? Every big corporation knows that all employees are just interchangeable cogs. If your lead engineers quit in the wake of an acquisition, no problem, you can hire replacements within a week!
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I think all of those were sold after the writing was on the wall for anyone who actually understood tech.
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Ok, how about Draw Something?
Zynga paid $180 million for Draw Something's 10 million users, tried to monetize the userbase by adding the sort of pay-to-win "features" that ruined Words With Friends, and they all left.
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Did YouTube ever positively contribute to Google's bottom line?
Even being a data mine (and a stupid way of forcing people to use Google+), I can't imagine it will come even close to paying off in the near future.
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Not only that, they go so far as to pay people for posting videos.
Not that they get any money from adblock leeches like me.
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Thank you for stating the obvious - I haven't been living under a rock and am quite familiar with YouTube's growing fondness for ads.
Still, we're talking about massive investments in infrastructure and bandwidth, plus paying people to make videos.
A few years ago, they were chin-deep in red ink. It's not easy to get rid of all the red ink.
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Re:CNN argues it's worth the money (Score:5, Informative)
> Did YouTube ever positively contribute to Google's bottom line?
Google bought youtube for about 1.6 Billion
Youtube annual revenue has been over that pricepoint for a few years. CPM on video has always been in dollars, not cents. CPAs frequently pass $10. With up to 3 ads per video, you can understand how google justified the first payments to content providers.
Ballpark numbers:
http://www.forbes.com/sites/ti... [forbes.com]
You seem ridiculously pessimistic for someone who hasn't done any research.
Re:CNN argues it's worth the money (Score:5, Insightful)
I suspect many WhatsApp users have it free. I do. Anyone who used it before they "monetized" doesn't pay. If they change that, or if Facebook starts mucking with it, I'll use something else.
There are a LOT of free texting programs, and it takes about a weekend to write another one. Extracting sixteen billion dollars from WhatsApp is going to be an exercise in futility. Hopefully the WhatsApp people are laughing their way to the bank (and selling their FB stock as fast as they can).
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There are a LOT of free texting programs, and it takes about a weekend to write another one
But this one comes with several hundred million users plus all their phones' address books...
Re:CNN argues it's worth the money (Score:5, Interesting)
Several hundred million users, some of whom have already pledged to quit since Facebook bought it, and many of whom will quit when the first annual renewal comes around and/or Facebook decides to introduce ads.
Besides, FB already has most of their address books. It's begged for mine often enough I'm surprised I haven't accidentally hit yes yet.
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But those who pledge to stop using it probably have several friends that don't care, so they either have to convince all their friends to talk to them on a different app, or stop talking to them altogether. Most of those people will probably give in and continue to use whatsapp
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Chat apps aren't exactly hard to install. Most people probably already have several. History has also shown that user retention on chat apps isn't particularly robust. Facebook is discovering this with their own Messenger, in fact, possibly a motivation behind acquiring WhatsApp.
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http://money.cnn.com/2014/02/2... [cnn.com]
But I will not tech history in the last 20 years is littered with companies that were bought because of instant messaging in one form or another, stuff like Skype, that later on did not really bring it's parent company anything (eBay sold skype to Microsoft at a loss iirc).
The problem seems to be how to integrate and monetize these services without people jumping ship. Until then, they are hosting a free service that's quite a bit to fund with no obvious revenue stream in sight other than ads.
Of course, Facebook is an expert on that, so it may turn out well for them. Still, amazing returns on a 4 year old company.
Free service? It's $.99/year/user so they are currently drawing in about $450M/year and importantly, they are enrolling at a rate of 1M users/day which is adding another $1M to the net revenue, every day. By this time next year, they will have 1B users. Finally, a company charging what SMS is worth (too bad you have to bring your own data plan but I digress).
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While I agree this is actually a service that makes money, it doesn't make quite as much as you assume. First, there's probably a good amount of dead accounts. And I believe there are longtime users that are grandfathered in for free. Second, the first year is free, so the revenue from an additional 1M users per day isn't realized for a whole year, and again that's assuming that all users decide they want to pay after a year is up.
Sure sounds like something different (Score:5, Interesting)
Are you sure it's really a honest acquisition and not a lame attempt to use a portion of your huge pile of money just to monopolize a market you're afraid of slowly losing?
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I think it's probably an honest attempt. I guess they might be thinking that google plus or someone else might successfully integrate text messaging and t
(Over valued)^2 (Score:5, Interesting)
(*) boni = plural of bonus
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When did boni become a synonym for bonuses?
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Re:(Over valued)^2 (Score:5, Insightful)
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Same thing probably happened with the 2d biggest tech.
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I have a boni.
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MySpace is back again.
No, MySpace is not back.
Dude, I'm telling you. It's back, okay? I got a profile on there now. The format is sick!
I hope you're right because I'd love to bring back my "Hey, Tom, I'm not your friend," joke.
My favorite observation... (Score:5, Interesting)
...was when someone commented that Sun Microsystems was worth about one third of a chat service.
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List of things that would have been far more useful than a chat service (out of at least 6 major players, plus a whole bunch of social networks [God, how I hate that term, I feel like throwing stuff at my TV when the term comes up on the news, especially because it's inevitably stupid non-news], so it's not like they're suddenly dominating a market):
Some 40 A380s at list prices (only chumps pay list prices for aircraft, so it'd be even more)
Some 160 A320neo at list prices (Or 15 more if you go for A320s wit
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social networks [God, how I hate that term]
How about "self-maintaining CRM"?
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Which typically amounts to a cross between a popularity contest, a pissing match with competitors and typical PR nonsense.
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2 Nimitz-class aircraft carriers, fully loaded with 100 F/A-18's each, and money left over for pilots/crew and munitions.
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Talent? (Score:2)
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How do they not take a writedown? (Score:3)
The question is, how does Facebook ever hope to recover the cost?
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Do they really expect $20million in annual revenue from WhatsApp to grow to cover that $16billion?
The question is, how does Facebook ever hope to recover the cost?
Apparently the personal data of 450 million users is worth approximately $35 per user to them...are targeted ads really that lucrative?
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The problem with that is that the intersection of Whatsapp users and Facebook users is likely to be large. So the number of new Facebook users may, relatively speaking, be close to zero. But this buy still makes more sense to me that the Snapchat price.
Who needs advertising when you can sell the comp.. (Score:5, Insightful)
Who needs advertising when you can sell the company for $16B? They'll just punt the founders and add in-stream/in-text ads related to the content of the text streams the user recently engaged in. Done.
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Who needs advertising when you can sell the company for $16B? They'll just punt the founders and add in-stream/in-text ads related to the content of the text streams the user recently engaged in. Done.
The service apparently costs $1 per year with a free one-year trial. Assuming they can get those 450 million (and counting) to go through the trouble of entering a payment method they're going to be making hundreds of millions of dollars without having to hire lots of people to device clever snooping and ad-targeting schemes. Sounds like a surprisingly sound business to me, if they can get the enter payment method flow to work smoothly.
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Yeah, but even at $500million a year, that's still 32 years till break-even.
I don't really think WhatsApp is going to last 32 years.
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Clearly you don't think like facebook exces. You just charge $32. Tada, 1 year break even.
Facebook bought WhatsApp to kill it (Score:5, Interesting)
WhatsApp was a great company and it has been bought about by an evil one that clearly intends to subvert it.
But I can hope that the founders of WhatsApp can use Facebook's money more effectively to create a new anti-advertisement business. Hopefully their use will outway the evil that facebook is about to do to WhatsApp
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Re:Facebook bought WhatsApp to kill it (Score:5, Insightful)
Their entire philosophy is screwed up - charging people for things that should be free (leaving a contract) and giving away stuff that should cost money (smart phones).
They hope to confuse people and make money off of their stupidity, rather than to offer a simple, clear, fair deal and make money from intelligent choices.
Re:Facebook bought WhatsApp to kill it (Score:4, Insightful)
Their policies DO make sense if you don't think about it.
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Except that, in the US at least, carriers have started making text messaging "free". Not actually free, but unlimited and included in the service. They've started charging for data usage instead. As much as people will complain, it makes a lot more sense than previous pricing structures.
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Buying users and eyeballs (Score:3)
Facebook is buying users, just like people bought eyeballs back in the day. When you push advertising, you need an audience - and if you can't grow it organically, you buy it.
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Any one know the overlap in numbers of FB and WhatsApp users? My guess it's nearly 100%, I don't know for sure.
The vast majority of WhatsApp users I know (granted, it's a small enough sample to count on one hand) don't have Facebook accounts. Of course, the total number of people "purchased" increases because I don't use WhatsApp, but I'm in all of their phones' address books, so I'm as good as being in WhatsApp...
Doesn't matter - What's App is another channel (Score:2)
User overlap probably doesn't matter as much as we think, because WA is a totally different channel than, say, Facebook. You have a TV and a computer, so why does Facebook want you on your phone? Because FB wants to be everywhere you - and your friends - are.
Even if WhatsApp never sells ads, it'll allow Facebook to target their ads better. WA knows where you are, when, and where you go, or it can. That can be used for lots of things.
The only better source of data on where mobile phones are and when would b
Privacy? Is your activity a property right? (Score:4, Insightful)
What is privacy these days? The USPS tracks every letter, or at least takes a picture of it (who knows what they do with that). The phone company always knew who you called, but they didn't care. Your mailman sort of knows what mail you got. Your friends, etc know what you like.
The question isn't about privacy, because that was always an illusion. The question is who do you want to know what?
Do I want google, and by extension advertisers (or entities in the advertising programs), to know anything about me? Amazon? Apple? My phone company? The government?
At least in the US, everyone sort of has an advertising profile. Who gets access to it and why? You have no real control over that.
Sometimes, advertising can be convenient. When you're looking for a car, it'd be nice to get a whole bunch of, say, test drive for dollars coupons.
Sometimes, it can be bad - like when you get medical condition related ads at home when you didn't want anyone else to know.
At some point the public needs to have the ability to take control of this information somehow. It's unclear how that's going to happen. Are online footprints considered property rights?
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What is privacy these days? The USPS tracks every letter, or at least takes a picture of it (who knows what they do with that).
I looked into that very issue. Turns out, it's actually not as nefarious is you might think at first. When you give a letter or parcel to them, they read the address on it and then they go and deliver it to that address. Blew me away.
AOL/TW doesn't count? (Score:4, Insightful)
AOL/TW was, by far, much larger than HP/CPQ.
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May be related (Score:5, Insightful)
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Sometimes I just can't think of a subject (Score:5, Interesting)
At the other end of the spectrum, the biggest bargain ever was NeXT acquiring Apple for negative $429 million.
What FB fails to see... (Score:2)
Is that the whole reason a service like this exists, when essentially all those users already have FB accounts, is because it *ISN'T LIKE* Facebook. It's uncluttered, and straightforward. It's the un-facebook. And they'll just break it by trying to monetize it.
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Err. without advertisement.
Yay Social Media Advertising Bubble!! (Score:5, Interesting)
I think it's time to call the near top of the social media bubble. Maybe this one will be called the Web 2.0 Bubble.
It's funny, because I remember the last tech bubble in the 90s ending a few months after similar insane acquisitions. Remember when AOL was bought by Time Warner because they were panicked that they would be left behind in the Web 1.0 future? How about all the IPOs of completely unprofitable companies based only on the fact that they sold stuff online or were funded by advertising?
I think whether this turns out to be a bubble or the "new normal" depends on how well these social media companies and device manufacturers can present themselves to the average joe as "the internet." Remember that AOL used to be "the internet" for anyone non-technical. People keep predicting the death of PCs simply because anyone under 25 uses tablets and phones as their primary computers, considers email old fashioned, and lives on Facebook. The question is whether this is universally true or just some hipster marketing buzz. I know people who live on Facebook, people like me who use it to post family pictures, and people who actively hate it. I think it could go either way, but the market for this stuff is way too frothy now. Even my boring corner of IT is being bombarded by cloud this and cloud that, and it's touted as the solution for everything.
The strange thing is this -- during the 90s, I was a new grad riding out the dotcom boom in one of those "boring" corners of traditional IT (sysadmin for an insurance company). This time around, I'm in a different "boring" corner of IT (systems architect in air transport). The plus side of this is that I never got laid off during the bust cycle. Marketing flash may sell IPOs, but people who actually know their stuff get to keep working when most of the fluff gets thrown out. Oh well... At least the 90s tech boom sparked a huge Internet build-out, oh, and left a lot of Aeron chairs on eBay. :-)
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Remember when AOL was bought by Time Warner because they were panicked that they would be left behind in the Web 1.0 future?
Erh, seemingly you don't. It was AOL who bought Time Warner, not the other way around:
In 2000, AOL purchased Time Warner for US$164 billion.[49] The deal, announced on January 10, 2000[50] and officially filed on February 11, 2000 [wikipedia]
Why Whats App was/is big in Asia/India (Score:4, Interesting)
When my cousin visiting USA texted to his brother in Singapore, the Singapore brother was like, "what? you got money growing in trees? Why send regular text when you have Whats App?"
But dumb phones market share is shrinking, Smart phones don't ever pay for international texting rates, they have more options... So I don't see Whats App growing any bigger than what it is. I am not sure people would be willing to pay more than a dollar or two per year for Whats App in smart phones. But I could be, and frequently have been, wrong.
I hope the payment was cash and not stock (Score:4, Insightful)
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You have more faith in FB stock than I do. I think it will be back down below 40 by the end of the year.
You may actually be over estimating my faith in facebook. I anticipate eventually that stock will be worth as much as stock in Pets.com. I just don't know if it will be in 2014, 2015, or 2016.
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Even if the stock tanks, I'd be happy with the $4B cash.
Social Media bubble... (Score:2)
They bought them BECAUSE of that stance (Score:2)
Facebook itself earns money from ads because that's the only way it can work.
Whats App Makes money the "real" way, by totally abandoning ads.
But in the middle is the network of connections between people. Facebook is much better off begin able to acquire this network information from both people who don't care about ads and those that do.
Even if all the information did was improve ads served to the people that didn't care about them, it would probably be worthwhile.
The real reason this happened... (Score:4, Insightful)
From what I understand WhatsApp requires you to use a real phone number (your cellphone number in fact) in order to receive text messages via your data plan rather than the SMS plans that cost extra with many carriers.
Sure, Facebook has a messaging app but they don't have your phone number. You can give it to them but I suspect that most people either leave it blank or put in a fake number. I suspect that a large part of this deal is getting a hold of that huge phone book that WhatsApp has now. Once FB has your cellphone number they can serve up ads to you via text messages even if you are not logged on to FB. Or maybe they will just sell your number to someone else.
Just watch - they will bury this 10 layers deep in the service agreement where nobody reads it. Next thing you know you'll be bombarded with junk...all in exchange for "free" text messaging. It's one more reason not to trust Zuck and company.
I'm not a WhatsApp user but if I were I'd be closing my account and looking for an alternative - pronto.
Can someone explain? (Score:2)
Can anyone explain why this acquisition is a good idea, and why WhatsApp is worth $16bn? I feel like I must be missing something. My impression of WhatsApp is that the technology behind it would be fairly trivial to recreate. I understand they have a large user base, though I'm not sure why, and I'm unsure how and why Facebook would expect to take on that userbase.
Is there a good hidden reason, or is it just another one of those moments when a tech company doesn't know how to grow beyond their one profi
Oh dear how sad (Score:2)
Do they indeed? How absolutely fascinating.
Now I can't say I'm keen on slashdot beta, but if someone lobbed an obscene amount of money in my general direction I might be able to overcome my objections.
Where the contract was signed is of interest (Score:2)
Jan Koum picked a meaningful spot to sign the $19 billion deal to sell his company WhatsApp to Facebook earlier today. Koum, cofounder Brian Acton and venture capitalist Jim Goetz of Sequoia drove a few blocks from WhatsApp’s discreet headquarters in Mountain View to a disused white building across the railroad tracks, the former North County Social Services office where Koum, 37, once stood in line to collect food stamps.
http://www.forbes.com/sites/pa... [forbes.com]
Major companies worth less (Score:4, Insightful)
To give you an idea of how ridiculously overpriced WhatsApp is (and Facebook as well), here's a selection of major American companies with a market cap less than what Facebook paid for WhatsApp.
Retail:
Macy’s
Gap
Bed Bath & Beyond
Tiffany & Co.
Ralph Lauren
Staples
Avon
Tech:
LinkedIn
Netflix
Xerox
Nvidia
Travel:
Marriott International
MGM Resorts
Hertz
Delta Air Lines
United Airlines
American Airlines
Southwest Airlines
Food:
Chipotle
Hershey’s
J. M. Smucker
Campbell Soup
Tyson Foods
Dr Pepper Snapple Group
Monster Beverage
Molson Coors Brewing
Other:
Harley-Davidson
Mattel
Whirlpool
Western Union
H&R Block
McGraw-Hill
News Corp
The Carlyle Group
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Apparently, they start charging $0.99 a year after a one year trial period. I've been using it for over a year and haven't gotten any notifications about buying a subscription though. They also got an $8 million investment from Sequoia Capital. They don't advertise (word of mouth only), they have less than 100 employees, and spend very little on their website.
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I would put AOL Time Warner as the biggest tech industry acquisition...
Yeah. $160 Billion [imaa-institute.org]. In 2000 dollars.
"Of all time" seems to mean "that we can think of off the top of our heads," because there are quite a tech few mergers in the list bigger than $16 Billion.