WhatsApp: 2nd Biggest Tech Acquisition of All Time

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WhatsApp: 2nd Biggest Tech Acquisition of All Time

Posted by timothy on Thursday February 20, 2014 @07:27AM from the of-all-time! dept.

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.

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2d biggest? by Joce640k · 2014-02-20 07:30 · Score: 4, Informative

Did they mean "2nd biggest"?
Why not just write "Second biggest"?

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1. Re:2d biggest? by EvilSS · 2014-02-20 07:41 · Score: 5, Funny
  
  This is slashdot, obviously it's in hex! So that would make this the 45th biggest in decimal.
  
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CNN argues it's worth the money by rolfwind · 2014-02-20 07:33 · Score: 5, Interesting

http://money.cnn.com/2014/02/2...
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.
1. Re:CNN argues it's worth the money by cheesybagel · 2014-02-20 07:41 · Score: 4, Insightful
  
  Skype? Hah. Remember ICQ?
  The funny thing is Facebook bought for billions a company which makes software running over XMPP. THAT was pathetic.
2. Re:CNN argues it's worth the money by ceoyoyo · 2014-02-20 07:59 · Score: 4, 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).
3. Re:CNN argues it's worth the money by gstoddart · 2014-02-20 08:22 · Score: 5, Informative
  
  Now that they have plenty of cash, what refrains the WhatsApp founders from starting over a concurrent application ?
  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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4. Re:CNN argues it's worth the money by ceoyoyo · 2014-02-20 08:25 · Score: 4, 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.
5. Re:CNN argues it's worth the money by Solandri · 2014-02-20 08:51 · Score: 4, Insightful
  
  The funny thing is Facebook bought for billions a company which makes software running over XMPP. THAT was pathetic.
  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.
6. Re:CNN argues it's worth the money by Jack9 · 2014-02-20 09:09 · Score: 4, 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...
  You seem ridiculously pessimistic for someone who hasn't done any research.
  
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Sure sounds like something different by trifish · 2014-02-20 07:33 · Score: 4, 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?
(Over valued)^2 by 140Mandak262Jamuna · 2014-02-20 07:33 · Score: 4, Interesting

Bulk of that 16 billion dollars comes in the form of Facebook stock, which is already heavily overvalued. And some of the retention boni (*) are restricted stock. So over all this valuation of 16 billion is overvalued whole squared.
(*) boni = plural of bonus

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1. Re:(Over valued)^2 by 140Mandak262Jamuna · 2014-02-20 08:22 · Score: 4, Insightful
  
  Well, I was shooting for +1 funny, so did not rewrite it. But God being kind gave me +1 informative, and I now look silly.
  
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My favorite observation... by DdJ · 2014-02-20 07:34 · Score: 5, Interesting

...was when someone commented that Sun Microsystems was worth about one third of a chat service.
Who needs advertising when you can sell the comp.. by xxxJonBoyxxx · 2014-02-20 07:45 · Score: 4, 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.
Facebook bought WhatsApp to kill it by gurps_npc · 2014-02-20 07:46 · Score: 4, Interesting

It seems obvious. WhatsApp, a product designed to kill abusive telephone policy rules (i.e. charge practically nothing per byte for internet access but a huge amount for the text messaging - when internet costs the corp money while the text messaging is free). WhatsApp is specifically anti-advertisement and Facebook is almost entirely about advertisement.
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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1. Re:Facebook bought WhatsApp to kill it by gurps_npc · 2014-02-20 08:10 · Score: 4, Insightful
  
  You are missing the fact that the telcos are not smart enough to make txt messaging free. They see it as a money maker, rather than a loss-leader.
  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.
  
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May be related by gmuslera · 2014-02-20 07:57 · Score: 4, Insightful

WhatsApp issues DMCA takedown notices against alternative clients shortly before the acquisition.
Sometimes I just can't think of a subject by sootman · 2014-02-20 08:00 · Score: 5, Interesting

At the other end of the spectrum, the biggest bargain ever was NeXT acquiring Apple for negative $429 million.

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Yay Social Media Advertising Bubble!! by ErichTheRed · 2014-02-20 08:26 · Score: 4, 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. :-)