Slashdot Mirror
How Jan Koum Steered WhatsApp Into $16B Facebook Deal
First time accepted submitter paulbes writes "Jan Koum picked a meaningful spot to sign the $19 billion deal to sell his company WhatsApp to Facebook [Wednesday]. 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. That's where the three of them inked the agreement to sell their messaging phenom –which brought in a minuscule $20 million in revenue last year — to the world's largest social network." Forbes overstates the apparent selling price by a few billion dollars; big numbers, either way. [Update: 02/20 13:51 GMT by T : The $19 billion makes sense, if you include retention bonuses in the form of restricted stock units.] Another reader points out the interesting fact that "Acton — himself a former Apple engineer — applied for jobs at both Twitter and Facebook way before WhatsApp became a wildly popular mobile app. Both times he was rejected."
I hear that facebook also offered $19 for slashdot beta.
...does happen, that isn't in of itself actually a surprise, especially when one considers that Mr. Acton had an education and a career that requires either an education or above-average ability (for the sum of humans total).
The thing that I find disappointing is how the nature of overvaluation in emerging software markets (ie, any software or service that isn't showing a profit) is reaching unsupportable levels. What I want to know is, have the users of these sites started truly fundamentally changing how they behave in terms of being led down certain directions as a result of their use of software-based services like Facebook, and if so will this reflect their purchasing habits? If the answer to the second part is no, then this is just a huge bubble as there is no real inherent value in social media from an advertiser's point of view. Given that advertising is the primary means of driving revenue these days, that spells disaster.
There was a documentary on PBS the other night about the nature of social media. It first started with the co-opting of youth culture, repackaging it, and reselling it back in the form of MTV in the early noughties, and contrasted to today, where people strive for "Likes" and "subscribers". Some individuals have made personal money successfully, but it doesn't seem to translate well into the corporate profit engine well. Persons and small businesses are unlikely to afford to buy advertising through social media, so I don't see how Facebook et al are going to profit substantially from this bottom-up form of media.
And I expect the bubble to burst. Both for individual companies (Facebook replaced MySpace, something will replace Facebook) and for the industry as a whole.
Do not look into laser with remaining eye.
Nineteen billion for a glorified instant messenger.
Facebook is going mobile - as are many (most) other players. This is one of the few mobile messaging networks that has a reach big enough to pull users away from Facebook. $19B is a reasonableamount of money to spend on defense to make a network that - internationally - is bigger than Twitter disappear as a risk.
Its not the revenue today, its the customer base (7% of the world population are regular users and its still growing rapidly). We're not used to international phenomenons like this, so of course the numbers look huge as absolutes. $38/customer is still a lot for a pure acquisition, so if they hadn't become large enough to be a credible threat they'd likely never have seen that much, but they did... and the rest is history.
You're special forces then? That's great! I just love your olympics!
...that the money for this transaction ultimately comes from all of us. We bought the products and services of the companies whose marketing and advertising rely on Facebook. And those of us who have FB accounts, (along with those of us who don't do our best to stop FB tracking us all over the Web), have made Facebook at least look like it's worth the money those companies hand over to it. That's how Facebook can pay almost a thousand years' of WhatApp's current revenue for the fledgling company.
A large part of what Facebook is paying for is to not have their position threatened. A large part of what built Facebook was photo sharing, can't risk anyone steal that position from them, which is why they also bought Instagram. Seeing it as a $19B investment to safeguard their $170B valuation makes more sense than trying to find the value in current SnapChat business.
They paid this amount for 450+ million users database from around the world their phone numbers, IMEI, MAC addresses, contact lists, ..... list goes on.
I don't get it. Even my shitty low-end cellular plan has unlimited texting, and WhatsApp doesn't seem to be doing much else. I can't even take the WhatsApp account with me when I change phone numbers. And WhatsApp is a big, bloated application.
Why do people actually use WhatsApp?
During the Holland Tulip bubble, tulips became worth enormous amounts and some, like a black tulip, were exceedingly. Reportedly, the owner of a black tulip bought what he believed was the only other black tulip in existence for a prodigious sum, and then crushed it with his foot. "HaHa! Now I have the only one!" (only in Danish).
whats.app had absolutely no intellectual property and it would take less than 1 million dollars to produce a polished work-alike. All the Facebook bought was it's customer list, nearly all of which probably already use facebook.
The tulip age has returned again. Pets.com zombies walk the earth.
Some drink at the fountain of knowledge. Others just gargle.
I can't hear the "he started out poor" line anymore.
Yes, one in a million poor people make it. So what?
Assorted stuff I do sometimes: Lemuria.org
And yet you often see very large parcels of empty land going for millions of dollars. Why? Because many developers understand that its not necessarily the current income that a property produces, but its income potential that you're buying. Sure, there's a discount for buying "potential" rather than "actual" earnings... but an empty tract of land is far from worthless, even if its bringing in less in revenue (cows/towers/etc) than its costing in taxes.
That's what we have with WhatsApp - one of the largest, most attractive "tracts of land" on the internet, currently making little to no revenue. That doesn't mean it never will.
You're special forces then? That's great! I just love your olympics!
Am I the only person that had never heard of "WhatsApp" prior to news of this buyout?
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
However, I think the keyword there is "global"; it seems to be pretty prevalent in non-Western countries from what I can gather.
Yes, it's the David Hasselhoff of messaging apps
http://www.whatsapp.com/
"Why we don't sell ads: Brian and I spent a combined 20 years at Yahoo! working hard to keep the site working. And yes, working hard to sell ads, because that's what Yahoo! did. It gathered data and it served pages and it sold ads. We watched Yahoo! get eclipsed in size by Google..."
Here is what just happened. Using a free app with no ads, some people collected the phone numbers and address books of 450 million suckers. Then for 4 Billion plus some stock, they sold all that information to Facebook, who will in turn re-sell that information selectively based on your Facebook habits directly to advertisers at a premium rate. There is also a messenger app and a bit of tech to enhance the already existing Facebook messenger a bit.
Part of me thinks the price was so high with stock simply to create a big buzz and get even more suckers to sign up, allowing them to reap more consumer information, etc...
Have fun getting robocalls for the rest of your existence until you change your phone number.