WhatsApp with Facebook’s Latest Purchase?
$19 Billion Bargain or Bust
What is up with Facebook’s latest purchase? Is WhatsApp worth the $19 billion that Facebook paid? Or are the rising valuations of tech companies signalling the start of another dot com boom cycle?
“I think that by itself, it’s worth more than $19 billion” Mark Zuckerberg
With Klout being acquired by Lithium Technologies for $100 Million and IPOs for Square and Gilt Group said to be in the works, it definitely feels like we are entering a boom period. It would also be really easy to chalk WhatsApp’s stratospheric price to being part of the boom mentality. However, I think a counterpoint can be found in Mark Zuckerberg’s own words at the Mobile World Congress conference in Barcelona:”I think that by itself, it’s worth more than $19 billion”. Or in other words he believes that he got a real deal at $19 billion.
Why would Mark think that he is getting a deal? The Statista infographic above offers the first point of evidence that WhatsApp was not overvalued. Based on a value per user basis WhatsApp comes in at almost half that of LinkedIn and Twitter and a third of Facebook. When coupled with the deep engagement level WhatsApp users demonstrate, this would tend to indicate that the per user price was a bargain.
|WhatsApp Average Monthly Use|
|Activity||Average Monthly Usage/User|
|Voice Messages Sent||13|
|Video Messages Sent||7|
Another point of evidence would be that according to research cited by Bloomberg from Ovum, WhatsApp drained $32.5 billion from telecommunication carriers in 2013 in terms of lost texting and voice communication fees. Furthermore, that figure is expected to rise to $54 billion by 2016. Given the volume of revenue WhatsApp is displacing from traditional carriers, one would expect that at least a fractional amount of that value could be extracted from WhatsApp down the line.Dark social is the “vast trove of social traffic (that) is essentially invisible to most analytics programs”.
Finally, one also has to consider that WhatsApp falls into a category of social media services called dark social, as coined by the Atlantic’s Alexis Madrigal. Dark social, as Madrigal defines it, is the “vast trove of social traffic (that) is essentially invisible to most analytics programs”. According to data from the Atlantic, dark social accounts for 2.5x more traffic than Facebook.
Furthermore, according to Madrigal, across a broader set of media sites dark social accounted for up to 69% of the traffic. The nearest second was Facebook, coming in at 20%. As such one could see the value that Facebook might put on starting to tap into the dark social realm. Even if they don’t monetize WhatsApps via advertising, tapping into the data that drives 69% of traffic to media site could prove immensely valuable.
All in all it seems that Facebook may have struck a good bargain here.