Is WhatsApp Facebook’s Defensive Deal to Stay Cool?

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Feb. 20 (Bloomberg) -- Bloomberg News’ Cristina Alesci and Bloomberg Contributing Editor Paul Kedrosky examine the reasons behind Facebook’s $19 billion acquisition of mobile messaging app WhatsApp on Bloomberg Television’s “Market Makers.”

How much it is going to pay for user growth.

Another storyline that will be developing over the next couple of hours and days is how much it paid to keep whatsapp out of competitors hands.

That is probably a huge part of the price tag.

Google may have had interest.

This is facebook posta very defensive move to stay relevant, to stay cool, and to own your network.

They want all communications with your network.

Whatever it is, they want you to communicate over one of facebook's platforms.

How much of this is keeping it out of google's hands?

It is not really an explosive growth story, is that -- is it?

Not an explosive profit growth story.

But an incredible growth story.

500 million photos shared per day.

These are gob smackingly huge numbers.

You are not paying for revenue.

You're probably paying some kind of negative optionality.

What kind of revenue?

6 billion people breathe air.

But it is free.

I have been using whatsapp for years.

I love both of them.

They don't cost me anything.

What is the point?

The way to look at it -- take twitter as an example.

250 million active users.

They will do in the neighborhood of $1 billion in revenue in 2015. take whatsapp -- 500 million, going to one billion users.

What kind of revenue command -- can they add?

There is no reason that you couldn't see similar numbers without creating an awful experience.

Twitter has not been destroyed by building a revenue model into it.

I am comfortable with the idea that there is a revenue model here.

That said of the story is not the issue.

The deeper issue is what discount could you apply to facebook earnings?

Where is the moat here?

I want to bring in --from january, one of the cofounders of whatsapp talking about why they won't be advertising.

He said that is not what they want to do.

Our company is built around -- they're a great technology companies in silicon valley that monetized by advertising to their users.

We felt that we wanted to take a different route.

Putting advertising on something so personal that is your phone and putting advertising in the way of people trying to communicate and wanted to stay in touch and messaging each other would be so, and our mind, wrong.

So they do not want advertising revenue.

They want more users.

How will they make money?

That is a good question.

The user number out there.

450 million users -- we do not know how many of those are paying users.

You only start paying after the first year.

It is really hard to even come up with a revenue estimate.

I have been using it for years.

I don't think i have paid.

Let's talk blackberry instant messenger.

It is one of the most viable things that had.

I loved it and still i started using an iphone.

What does this mean for blackberry?


so sad.

This thing is such a dinosaur.

There are all kinds of issues with the valuation.

There is an asset to be sold here am a but i don't think this materially changes what you will get out of the sale.

What does it mean for candy crush?

If you are paying $19 billion for whatsapp -- candy crush -- if it is $19 billion for whatsapp, what on earth is snapchat worth?

It could go and apply the same metric -- $40 per active user -- that seems to be what we are looking at if you look at it on a market user basis.


-- wait.

The numbers on the per user basis are all over the map.

I agree.

Look at linkedin, twitter, facebook valuation's. you are sitting at over $100. look back in history.

When microsoft bought hotmail, you're looking at similar prices.

These prices have been paid for a long, long times.

I think people are going in the wrong direction by getting hung up on the $19 billion.

That is the reflection of a company that has seen stunning growth over five years.

Is it too soon to evaluate mark zuckerberg is a dealmaker?



[laughter] you were laughing at me.

I think that is a great question.

Zuckerberg just decided, i am going to hang out with this guy, we are going to spend valentine's day together, we are going to each covered strawberries, and that i will lead him -- give him $19 billion.

Is someone that looks at this on the face of it, it begs the question, does facebook think its own stock is overvalued?

Does it think that now is the time to do this kind of a stock deal because we have the firepower behind us right now?

Which was the lesson of the 1990's. too many companies did not use overvalued paper to do transactions.

They sat on it hoping it would go higher or they used cash.

Kudos to them for doing the right thing, which is using the paper.

This is the biggest deal since aol bought time warner.

The biggest venture capital deal ever.

Should we change the way we are using facebook?

Is it just a suite of apps that people care about?

People sure love instagram and whatsapp.

A lot of these people who are using these products have absolutely no idea that facebook is the owner of these products, which is even more remarkable.

You have to ask yourself, what does that imply about facebook also you asian?

That must -- facebook's valuation?

What does that mean going forward?

If it going to be a series of acquisitions?

-- is it going to be a series of acquisitions?

Zuckerberg is buying users

This text has been automatically generated. It may not be 100% accurate.


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