So over the last few days the tech blogs around the world have been going crazy about WhatsAPP’s acquisition price. Facebook confirmed in a press release the sale price was 16 Billion in cash and stock with early investors in the company gaining a huge ROI. I have noticed many negative comments about the price paid for the APP, many people say it is a crazy price to pay for an APP I agree in some ways yet in others I can see where Facebook has merit in the buy.
Now I decided to do some quick research into the APP and one of the best usage data trends I noticed was the image below (Global messaging usage data)
Source: Onvao Insights
This data shows how powerful the APP is in various markets, the user base is well over 450 million which has jumped 200 million in the last 9 months. The app is also sticky with users with over 70% use age rate on the app.
I think the key reason that Facebook made the acquisition is for market protection, they are probably worried that a competitor in a similar business could purchase the app and develop it into a social network with the room to win in on a percentage of Facebook’s user base. That been said they also have purchased the APP to increase the overall use rate of the messaging product and as Zukerberg states “Connect the world”
The only concerns from an investment point are the following:
1. The only revenue the business has is the $1 per use use fee.
2. The users of the app are very anti- ads, the founders claimed they do not want ads on the product.
3. What happens if another competitor comes up in the market at the same pace? Will Facebook be forced to make yet another multi-billion acquisition.
4. Overall I think the price page was defiantly on the high side yet from the metrics above when you start researching into the product you can see why this was a strategic move they needed to make.
5. So overall it will be interesting to see where Facebook has a long term ROI strategy in this business.
Another funny twist in the story is that Facebook and Twitter both had the chance to hire the developer who was a founder of WhatsAPP, yet he was turned down. It was a hire worth several billion at that (refer to image below)
In addition to this many people are now in the market to develop an APP in the past we have written about how to promote you APP online, which may be helpful to users – http://jamesnorquay.com/the-surge-mobile-apps-basics-promote-mobile-app/
Let me know your thoughts on the WhatsAPP purchase below: