Facebook bought Whatsapp for $19B in cash and stock ($16B buyout and $3B in incentives for the founders to stay with Facebook post-merger). Seriously, that is not a joke. I thought the headline was a joke when I saw it. It’s for real.
Allegedly, it’s a valuation of $40 per user, similar to other deals.
Has anyone here ever heard of Whatsapp before the deal was announced?
Allegedly, most of Whatsapp’s users are in other countries, especially India. Allegedly, that’s the reason Whatsapp sold for so much money, even though most people in the USA never heard about it.
The deal is obviously stupid. This is going to end up like almost all mergers, where they mismanage the acquisition and in a few years all the users leave for a competing product. (One notable exception is YouTube, which is subsidized by Google’s other revenue. One reason a serious YouTube competitor hasn’t emerged is the huge cost of storing and streaming videos.)
Whatsapp has usefulness for at most a couple more years, even if it would be managed well. In a couple years all phones will have a built-in app that does messaging as well or better.
Also, the valuation of $40 per user doesn’t make sense when most of the users are outside the USA, especially in 2nd and 3rd world countries. Facebook makes money from advertising, and advertising to US users is much more valuable to 3rd world users.
Mark Zuckerberg and his backers have special super-voting shares in Facebook, which gives them control of the company even though it’s public. That prevents an “activist investor” from buying up Facebook shares and trying to prevent them from wasting money. Besides, Facebook makes most of its profit off hype and not a legitimate revenue stream, making it unattractive for a typical leveraged buyout. With special super-voting shares, it’s easy for insiders to squander shareholder money on frivolous buyouts.
Given that most of the users are in India, there’s an obvious conspiracy theory. Pay a bunch of people in India $1-$5 each to install the app, then flip it to Facebook for billions. Easy money! (There is one indirect legitimate benefit. Some cell phone plans charge less for data than for text messages, making it a legitimate savings if you use an app instead of text messages. However, most US smartphone plans include unlimited text messaging now. The cost to the cell phone company per text message is negligible. Any data plan benefit to using an app instead of text message is temporary at best, as data plans and text messaging plans improve.)
The founders and backers of Whatsapp swear they didn’t pay for user acquisition. If you believe that, they’ve got an overpriced startup to sell you.
There’s another conspiracy. Allegedly, the same group of insiders control Facebook and Whatsapp. The buyout enables a $19B wealth transfer from Facebook shareholders to Whatsapp’s shareholders and founders. It’s the usual trading favors game. Whatsapp’s backers get a lot of free money, in exchange for unspecified favors later. Facebook is nearing the end of its pump-and-dump lifespan, so milk the shareholders while you can.
The $19B isn’t free money. The cost is dilution for the current Facebook shareholders. The share price of Facebook will tank as insiders dump their overpriced shares on unsuspecting suckers.
Even when the Whatsapp buyout inevitably flops, there will be vague excuses and no accountability.
There’s another theory I heard. Whatsapp owns some patents, presumably the usual type of junk software patent that should never been issued in the first place. Allegedly, Facebook is buying Whatsapp for these patents, either defensively or so they can sue others in the future. Most software patents are things that would be obvious to any software expert in the area, but what counts is the ability to manipulate the legal system. Patents are legal extortion. Facebook might be buying the right to engage in legal extortion in the future, or prevent from being the victim of legal extortion.
This is such an obviously stupid deal that I thought the headline was a joke. It is possible that people in other countries were paid to install and use the app, inflating the numbers. It certainly would cost much less than $19B to buy a bunch of users. The deal is a huge wealth transfer from Facebook shareholders to Whatsapp shareholders. If you were dumb enough to invest in Facebook, you deserve to get robbed.
The only reason this is dumber than Google’s Nest buy is the price. There is no way the app is worth $19B. The only time I’ve heard of it was when a coworker figured out WhatsApp was killing his Galaxy S3 battery.
I’ve noticed that on Android. Something that runs in the background can really drain your battery, even if your phone is locked and the screen is off.
If a program runs in the background with frequent updates and push notifications, it can drain your battery AND your data.
What I do now is reboot my phone whenever I’m done, which flushes things that would otherwise be running in the background.
[Apparently the newest version of Android PREVENTS APPS FROM WRITING TO THE EXTERNAL SD CARD. That seems to be another effort by Google to force people to use cloud storage like Google Drive.]
The external storage issue is more complicated, and I don’t know how I feel about it. There are reasonable arguments for why blob of storage should be available for any program (I use different audio players, etc.), and also reasonable security arguments for why programs should be separated.
I’m just bummed at how limited the external storage market has gotten. All the phone vendors except Samsung seem to have given up on them, and then make you pay an extra 100-200 dollars for a measly additional 16 to 32 GB. Meanwhile I picked up a 64GB MicroSD card for my Galaxy Lite (a $150 non-subsidized phone). My only requirement for a phone was 1) external storage available, and 2) removable battery. How hard is this for manufacturers to figure out?
That’s the reason to limit the external storage. Why let people use a removable SD card, when you can charge them $100-$200 more for an extra 16G-32G of internal storage? That’s been a huge profit center for Apple, charging people a lot more for a little extra storage.
You should be allowed to give an app unlimited access to external storage, if you want. It’s your phone! Almost every app I use writes to external storage! (text editor, emulators)
I’m considering switching to T-Mobile. The phone isn’t subsidized, but it’s more than offset by the cheaper monthly cost. Plus, if I keep my phone more than 2 years, it winds up cheaper.
I miss the physical keyboard on my Droid 3. I didn’t get the Droid 4 because it didn’t have a removable battery. Do you realize how many times I had to take out my phone’s battery to reset it due to an Android OS bug?
I would try something other than Android or iPhone, if there were a viable alternative. Maybe ubuntu phone will be good, but I’m skeptical.
Whatsapp is quite popular in India. And not because bunch of indians were paid to use it. Majority of the mobile users in India use prepaid and before Whatsapp we used to pay for unlimited SMS plans every month. Due to the surge of cheaper Android handsets, as well as cheap data plans, most of the users now prefer Whatsapp over traditional SMS (also because it support longer messages, images and videos). That being said this buyout is quite ridiculous if facebook thinks it will help users turn to use facebook messenger. Whole point of prefering Whatsapp over facebook was that you don’t have to fill lots of details about yourself before using it, your phone no is your username and your contacts are your friend list.