whatsapp...

jamesmith

Maybe I am too old fashioned...I don't see how whatsapp is worth $19 billion...most acquisitions destroy value for shareholders...

Roughly 2.4 billion internet users in the world, out of 7 billion world population...

whatsapp has 450 million unique month active users. For comparison, Facebook has 1.23 billion monthly active users as of December 2013, and growth has slowed to 18% year on year, it's highly likely growth will slow down more.

whatsapp current business model, new users get first year for free, then pay 99 cents per year. Estimated yearly revenue $400 million, cost should be pretty low, for the sake of simplicity, let's say they make $450 million profit.

There are limited amount of internet users, so user growth have to slow down.

let's say it grows at 50% a year for next 3 years, then grows at 25% for 3 more years, then 15% for 5 years. They will make $33.9 billion profit for 12 year.

Let's say Facebook's cost of capital is 5%, $19 billion after 12 years will worth $32.5 billion.

So this acqusition will only be profitable after 12 years, if whatsapp can grow at these very high rates for 12 years.

What is the probability they will get this kind of growth and profitability?

How sustainable is their competitive advantage give the low barrier of entry?

There are already lots of players in messaging:

Facebook messenger, Skype, MessageMe, Kik, BBM, iMessage, SMS, Email, Twitter, Viber, Line, WeChat, Tango Messenger, VooVoo, Google Hangouts, TextMe, imo, XMS, GroupMe, Path, Kakoa Talk, Cubie, Hike, Maaii, Rounds, Snapchat, Nimbuzz, ChatON, Voxer, Yahoo Messenger, Text 2 Group, Instamessage, IM+, Molto, Hipchat, DiDi, iMessenger, Textie, Yak Messenger, WaZapp, Upptalk, iGotChat, Palringo Messenger, Coco, Telegram Messenger, Bobsled Messaging, Chat for OMegle, Libon, Truphone…

dsp

I do not understand this deal as well. I hate FB, so will drop off my Whatsapp later on.

Lufthansa

土豪表示这样说明不差钱前景好

jamesmith

Lufthansa 发表于 2014-2-20 03:30 AM
土豪表示这样说明不差钱前景好

FB 2013 net income is $1.49B, and balance sheet has $11.45B cash. $16B price is still significant...

Lufthansa

jamesmith 发表于 2014-2-20 03:34 AM
FB 2013 net income is $1.49B, and balance sheet has $11.45B cash. $16B price is still significant. ...

这些数据可能有些滞后，现在他可能又融到资金有更多的钱了，况且今年FB股票也涨了很多。
是很夸张，但这就是吹泡沫吧，目前还不算很大

oldcat

Do you know how much tcehy will worth without wechat? Wechat valuation should large than 50B

水明善

This is a tough issue: how to evaluate the potential of whatsapp.

If compare to market value of Twitter, the purchase price is not so expensive, especially considering about the numbers of active users and growth rate.
If compare to the revenue or profit of whatsapp, FB is crazy.

So the question is how FB will use whatsapp to improve its earning power. By the way, whatsapp can be a potential threat to FB.

Your assumption is based on current revenue model of whatsapp, 0.99 per user. However, this can be changed.

jamesmith

水明善 发表于 2014-2-20 11:15 AM
This is a tough issue: how to evaluate the potential of whatsapp.

If compare to market value of T ...

It is tough, and I have no ability to estimate the future of social media so I can't pick winners. The most concrete thing to rely on is current MAU and revenue.

In general, I think synergies are overvalued and big acquisitions destroy shareholder value more often than create new value.

What you said are all possible, FB might be able to milk more money out of users.

One way to look at it is that the deal is $4B cash and rest in FB stock and RSU. Current FB market cap is 177.35B, PE 113.96.
So this is using $4B cash and probably overvalued FB stock to buy another company.

jamesmith

oldcat 发表于 2014-2-20 09:34 AM
Do you know how much tcehy will worth without wechat? Wechat valuation should large than 50B

How did you came up with $50B valuation for wechat?

I have skimmed through at tencent earning report, I don't think I can value tencent with high confidence. But it is clear to me the earning model of tencent is quite different from Facebook. You can look at its earning reports from here: http://www.tencent.com/en-us/ir/news/2013.shtml

wechat currently is more of a enabler and a valuable service to increase/retain customers for tencent. In terms of direct earning it is very low. It does have huge potential, I am not denying that, but I don't think it is worth anywhere near $50B.

Lufthansa

估计看中还是用户数量和分布吧

oldcat

50b is my estimate, the other said 30B. http://www.hutong9.net/forum.php ... &extra=page%3D1
The point is wechat is valuated much high then whatsapp and the price FB paid is not as high as our first impression if we look at the details.

jamesmith

oldcat 发表于 2014-2-21 11:31 AM
50b is my estimate, the other said 30B. http://www.hutong9.net/forum.php?mod=viewthread&tid=242492&e ...

Can you share how you come up with that estimate? I will be interestd to see how it is justified.

bigbadwolf

Without messaging services, FB could not maintain its user base for long. That's a survival issue.

oldcat

wechat is the only hypergrowth part. I assume the rest of company should have the same PE ratio as goog would worth 70-80B, so there are 50B market cap come from wechat.

jamesmith

oldcat 发表于 2014-2-21 12:48 PM
wechat is the only hypergrowth part. I assume the rest of company should have the same PE ratio as g ...

I see, thanks for sharing…I understand that's how market is pricing it now. That's pricing by comparison (similar to how people price houses by looking at recent comparable home sales nearby), many flaws to this method...Market price something this much, doesn't mean it's intrinsic value is this much…this tells me Tencent could be overvalued.

since I am typing already, and many look at whatsapp by comparing wechat, one thing to note is that Tencent's business model is quite different from Facebook. Facebook got most of their revenue from ad and e-commerce. These are relatively small part of Tencent, most of its revenue comes from value added services (VAS), such as special items in free to play games, or more icons in QQ and wechat, you get the idea…
and believe it or not, higher profit margin then Facebook. Tencent profit margin is 27%, FB is 19.88%.

image from economist: http://www.economist.com/news/bu ... oney-tencents-worth

Cheese

隔一段时间总得找点啥让花街high啊，要不怎么活下去？

bigbadwolf

Submitted by Peter Schiff of Euro Pacific Capital,

Two pieces of business news announced this week provide a convenient frame through which to view our dysfunctional and distorted economy. The first (which has attracted tremendous attention), is Facebook's blockbuster $19 billion acquisition of instant messaging provider WhatsApp. The second (which few have noticed) is the horrific earnings report issued by Texas-based retail chain Conn's. While these two developments don't seem to have much in common, together they shed some very unflattering light on where we stand economically.

Given the size and extravagance of the Facebook deal, it may go down as one of those transactions that define an era (think AOL and Time Warner). Facebook paid $19 billion for a company with just 55 employees, little name recognition, negligible revenues, and little prospects to earn much in the future. For the same money the company could have bought American Airlines and Dunkin' Donuts, and still have had $2 billion left over for R&D. Alternatively they could have used the money to lock in more than $1 billion in annual revenue through an acquisition of any one of the numerous large cap oil producing partnerships. Instead they chose a company that is in the business of giving away a valuable service for free. Come again?

Mark Zuckerberg, the owner of Facebook, is not your typical corporate CEO. Through a combination of technological smarts, timing, luck, and questionable business ethics, he became a billionaire before most of us bought our first cars. And in the years since social media became the buzzword of the business world, Wall Street has been falling over backward to funnel money into the hot sector. As a result, it may be that Zuckerberg looks at real money the way the rest of us look at Monopoly money. It also helps that a large portion of the acquisition is made with Facebook stock, which is also of dubious value.

But even given this highly distorted perspective, it's still hard to figure out why Facebook would pay the highest price ever paid for a company per employee - $345 million (more than four  times the old record of $77 million per employee, set last year when Facebook bought Instagram). The popular talking point is that the WhatsApp has gained users (450 million) faster than any other social media site in history, faster even than Facebook itself. Based on its rate of growth, the $42 per user acquisition cost does not seem so outrageous. But WhatsApp gained its users by giving away a service (text messaging) for which cellular carriers charge up to $10 or $20 per month. It's very easy to get customers when you don't charge them, it's much harder to keep them when you do.

Boosters of the deal expect that WhatsApp will be able to charge customers after the initial 12-month free trial period ends (it now charges 99 cents per year after the first year). Based on this model, the firm had revenues of $20 million last year. But what happens if another provider comes in and offers it for free? After all, the technology does not seem to be that hard to replicate. Google has developed a similar application. More importantly, no one seems to be projecting what the cellular carriers may do to protect their texting cash cows.

WhatsApp gives away what AT&T and Verizon offer as an a la carte texting service. As these carriers continue to lose this business we can expect they will simply no longer offer texting as an a la carte option. Instead it will likely be bundled with voice and data at a price that recoups their lost profits. If texting comes free with cell service, a company giving it away will no longer have value. People will still need cellular service to send mobile texts, so unless Facebook acquires its own telecom provider, it can easily be sidelined from any revenue the service may generate.

Some say that texting revenue is unimportant, and that the real value comes from the new user base.  But how many of the 450 million users it just acquired don't already have Facebook accounts? And besides, Facebook itself hasn't really figured out how to fully monetize the users it already has. In other words, it is very difficult to see how this mammoth investment will be profitable.

From my perspective, the transaction reflects the inflated nature of our financial bubble. The Fed has been pumping money into the financial sector through its continuous QE programs. The money has pushed up the value of speculative stocks, even while the real economy has stagnated. With few real investments to fund, the money is plowed right back into the speculative mill. We are simply witnessing a replay of the dot com bubble of the late 1990's. But this time it isn't different.

投资人

Zuckerber 当年 拒绝 WhatsApp 当年的 创始人 Koum 和 Acton 的Facebook的工作申请。 现在则要用超过当时雇佣他们的年薪十万倍的资金去收购他们， 估计肠子都悔青了。Mark Zuckerber 的眼力价啊，早就该从公司舵主的位置上下来了。