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The fact that FB chose to pay $12BN in stock for this tells you something about what they think of their current valuation.

tomkarlo 13y ago
That's a lot of money for an app with relatively little lock-in and a $0.70 (maximum) ARPU.
- mschuster91 13y ago
  The lock-in is the network effect, and well, if you're aiming for 1-1.5B users (which can be served with virtually no employment and hosting costs) you're looking at 1B $ yearly profit.
  - tomkarlo 13y ago
    Not sure how you're figuring that. At best - 1.5Bn users locked in - you're at less than $1bn _revenue_ (after you net-out the 30% that goes to Apple or Google for an in-app transaction) and much lower net profits (presumably, it costs some fraction of a dollar in ops, bandwidth and cpu to support a paying user for a year.) Also, even at $1bn in revenue, this is 16X sales... that's usually the kind of price you'd see for a company that can still grow a lot. When you have 1/12 of the world's population as users, and you're capped at $1 per year per user, there's not a lot of places to grow. Clearly FB valued this based on strategic value to their broader platform.
    - antrix 13y ago
      > and you're capped at $1 per year per user Why would that be the case? There are always other revenue streams to be explored using the same user base.
      - tomkarlo 13y ago
        Maybe, but they're also entirely speculative. We can only evaluate the price based on the business they have, not imaginary alternate revenue streams.
        howeyc 13y ago
        > We can only evaluate the price based on the business they have, not imaginary alternate revenue streams. I would really like to agree, but given recent valuations that doesn't seem to be the case does it?
        tomkarlo 13y ago
        Regardless of how insane deals may seem, you can still only evaluate them based on available facts. If you're going to start speculating about fictional future revenue streams, there's no point to even bothering to contemplate if the price makes sense.

tomkarlo 13y ago

That's a lot of money for an app with relatively little lock-in and a $0.70 (maximum) ARPU.

mschuster91 13y ago
The lock-in is the network effect, and well, if you're aiming for 1-1.5B users (which can be served with virtually no employment and hosting costs) you're looking at 1B $ yearly profit.
- tomkarlo 13y ago
  Not sure how you're figuring that. At best - 1.5Bn users locked in - you're at less than $1bn _revenue_ (after you net-out the 30% that goes to Apple or Google for an in-app transaction) and much lower net profits (presumably, it costs some fraction of a dollar in ops, bandwidth and cpu to support a paying user for a year.) Also, even at $1bn in revenue, this is 16X sales... that's usually the kind of price you'd see for a company that can still grow a lot. When you have 1/12 of the world's population as users, and you're capped at $1 per year per user, there's not a lot of places to grow. Clearly FB valued this based on strategic value to their broader platform.
  - antrix 13y ago
    > and you're capped at $1 per year per user Why would that be the case? There are always other revenue streams to be explored using the same user base.
    - tomkarlo 13y ago
      Maybe, but they're also entirely speculative. We can only evaluate the price based on the business they have, not imaginary alternate revenue streams.
      - howeyc 13y ago
        > We can only evaluate the price based on the business they have, not imaginary alternate revenue streams. I would really like to agree, but given recent valuations that doesn't seem to be the case does it?
        tomkarlo 13y ago
        Regardless of how insane deals may seem, you can still only evaluate them based on available facts. If you're going to start speculating about fictional future revenue streams, there's no point to even bothering to contemplate if the price makes sense.