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Pretty amazing that this is precisely what Microsoft paid for Hotmail in 1998 : $400 million for 10 million users = $40 / User. [1] The parallels are striking

Pretty amazing that this is precisely what Microsoft paid for Hotmail in 1998 : $400 million for 10 million users = $40 / User. [1] The parallels are striking : Whatsapp is to messaging today what Hotmail was to messaging in the late '90s. [1] http://news.cnet.com/2100-1033-206717.html http://news.cnet.com/2100-1033-206717.html

muyuu 13y ago
It made more sense for MS though. They were basically kickstarting their internet services and had very few users. Facebook can mine some more data from this I guess, but something rather marginal from what they already have.
- pitchups 13y ago
  True, the reasons are different. But the motivation is the same : to stay ahead of the competition. In my view, and based on my own experience, Whatsapp is being used as a light-weight social network built around messaging and optimized for mobile phones. In fact, I share a lot more stuff with friends and family on Whatsapp - including pictures/videos/messages - than I do on Facebook. The more Whatsapp satisifies my sharing needs, the less I use Facebook. And that is a competitive threat to Facebook. Instagram was similar - a light-weight social network built around photo-sharing. I think Zuckerberg is a deeply strategic thinker trying to avoid the pitfalls of the "Innovator's Dilemma". Both Instagram and Whatsapp are classic examples of what is described in Innovator's Dilemma - light-weight products that can slowly eat into the market share of the incumbent, and ultimately displace it. Edits : formatting.
  - lifeisstillgood 13y ago
    yes yes and yes. But boy - 16 billion.
    - jmathai 13y ago
      The opportunity cost is much larger if they miss out. It's the difference between ponying up tons of cash to stay relevant or fading into obscurity.
      - nousernamesleft 13y ago
        But it in no way ensures they stay relevant. It is literally just blindly flailing around buying anything that gets a lot of users out of fear and having no idea how to maintain their position.
        jmathai 13y ago
        It doesn't ensure they stay relevant but it's a better strategy than watching your target demographic leave your platform. It's a $19B investment in trying to keep people on Facebook. $20B if paired with Instagram and $24B if they had acquired SnapChat. The numbers sound crazy but they're trying to hold on to and grow a market cap that's currently $175B. Zuck has some steel nuts but it's what got him to the $175B number in the first place.
        nousernamesleft 13y ago
        >It doesn't ensure they stay relevant but it's a better strategy than watching your target demographic leave your platform. I don't see any evidence to support that claim. It is a different strategy, but I don't see any indication that it is better. Flushing a few billion dollars down the toilet is a different strategy too, but that doesn't make it better.
ozgune 13y ago
Except that people weren't paying to get a Hotmail account. WhatsApp users pay $1/year, so their revenues are around that of Twitter's.
- robbiep 13y ago
  you mean $1 once when they first install it? the 'pay this amount' was a well known scam message
  - olegious 13y ago
    Android users pay an annual fee.
    - scrabble 13y ago
      My first year free just ran out. They sent me a message that I get to continue for another year for free. It's hard to believe anyone pays for this.
      - boomzilla 13y ago
        Have you been a heavy user? I have a sneaky feeling that they will let light users have it free, but start charging heavy users. That makes sense, because if you are a light user, there is not a lot incentive to pay.
        hocuspocus 13y ago
        I use it every day and I got my free account expiration date upgraded to "lifetime". Admittedly, I'm a light user regarding bandwidth usage; I do share some pictures, but probably a lot less than the average user. I honestly don't think I know anyone who pays the annual fee.
        mehrdada 13y ago
        Due to network effects, it makes very much sense to let frequent users ride freely (perhaps not bandwidth hogs, but frequent communicators with multiple friends), as they'll bring in and keep many other users in the system.
stusmall 13y ago
Not taking inflation into account. 400 million for 9 million users adjusted for inflation is a bit over $60/user
higherpurpose 13y ago
You mean almost at the height of the dotcom bubble? Maybe that should say something about this acquisition.
- pdpi 13y ago
  You mean one of the more sensible purchases amidst all the idiocy of the first dotcom bubble? I mean, I fail to see how buying Hotmail was a bad idea for Microsoft.
ulfw 13y ago
Hard to compare though. Microsoft had barely any internet/web users back then. They had zero email users. Facebook has a billion or so give or take. All of which can get Facebook messages in their mobile apps already. How much overlap is there with Whatsapp?
- mdmarra 13y ago
  > How much overlap is there with Whatsapp? This is the question. Apparently a sizeable number of teenagers and pre-teens have zero interest in FB. It's where their parents post cat pictures and make dinner plans. From what I understand, Kik, WhatsApp, and Snapchat are all what's "cool" with the under 18 crowd. This move may ensure that FB still has sufficient data to mine on this demographic in the future.
teacup50 13y ago
Scale matters. $400M vs $16B. How much of that $400M price was set based on $-per-user? On top of that, this was back in the first bubble, and we saw how that went.
Titanous 13y ago
Microsoft also paid $8.5 billion for 663 million Skype users in 2011, which works out to $12.82/user.
- anges244 13y ago
  You are comparing Skype to WhatsApp? Don't you think it's kind of apples and oranges? Skype had technology that Facebook itself uses for video chat and WhatsApp supposedly has a large user base which mysteriously enough is so different than FB user base, that it's worth $16b?
  - movingahead 13y ago
    As someone who is a heavy user of both Whatsapp, GTalk/Hangouts and FB Messenger, I find Whatsapp to be much faster than others. So, there could be some technological value to this deal. Microsoft had its own Live Messenger and Lync too, so the acquisition in both cases was for the user base and the brand than technology IMO.
ams6110 13y ago
I'll admit to a distinct feeling, that I've started to lose touch with pop technology. I've never heard of WhatsApp. Though I had most definitely heard of Hotmail in 1998.
- crucialfelix 13y ago
  WhatsApp has huge global growth. I heard that little chirp everywhere I went in India. friends in Africa use it all the time. in countries with SMS charges, whatsapp is a good deal.
  - nullspace 13y ago
    > in countries with SMS charges The funny thing is that in places like USA, you pay exorbitant amounts (~20 USD per month) for text messaging (when the real cost should be almost 0), yet it's still not caught on here - which is kinda sad.
    - atwebb 13y ago
      It's just because it matters more that we have all of our contacts than save $20 a month. I think you'd need higher priced SMS or a very large WhatsApp userbase.
      - nullspace 13y ago
        That is a very good point, even if you don't immediately realize the deeper implications. :) In India, you generally pay per text message - so if you can convince even 3 of your close friends to start using Whatsapp, you save (say) 20% of your phone bill. Here in US, if you are going to send more than a few texts a month, you are going to be paying 20 USD. So there is no real monetary incentive (initially) for you and two of your friends to switch to Whatsapp.
        guelo 13y ago
        So why didn't Indian telecoms implement all-you-can-eat messaging to stop the erosion of users moving to WhatsApp?
loceng 13y ago
Facebook's only job is staying alive. That's the very minimum they can do, and is all they're trying to do.
- anges244 13y ago
  But they are trying only with tricks and short term solutions just to keep their stock prices high. Acquiring everything isn't a planned strategy for growth but rather a fear of the next facebook strategy, which obviously is not and couldn't be WhatsApp. Instagram maybe but still...
  - loceng 13y ago
    If someone else acquired WhatsApp, would be the fear.
auctiontheory 13y ago
The parallels are striking : Whatsapp is to messaging today what Hotmail was to messaging in the late '90s. With 10 million users, you could grow 100x, or more. With 400 million users, 100x growth is harder.
vmavalankar 13y ago
You know we all feel the same http://vmavalankar.svbtle.com/why-facebook-bought-whatsapp http://vmavalankar.svbtle.com/why-facebook-bought-whatsapp
jpkeisala 13y ago
On the other hand Microsoft buying Nokia's phone business in a $7.2 billion seems like good bargain since they are supposedly have more than billion users. WhatsApp is just an App.
- JTon 13y ago
  Whatsapp is incredibly lean. I believe the only have 32 engineers working for them. I can imagine Nokia has much more expensive baggage in their name
- Alterlife 13y ago
  Sun Microsystems was aquired by Oracle (java, mysql, hardware division, patents and all) for $5.6 billion. Sun could probably be said to have more 'users' than what's app, but it's a different context for the user. Motorla Mobility was aquired for 12.5 billion. I don't even know what to compare the whatsapp aquisition to. The valuation seems quite insane.
smikhanov 13y ago
Microsoft/Hotmail deal normally considered to be at the top end of the price range of pre-bubble acquisitions. I.e. it was really expensive back then too.

muyuu 13y ago

It made more sense for MS though. They were basically kickstarting their internet services and had very few users. Facebook can mine some more data from this I guess, but something rather marginal from what they already have.

pitchups 13y ago
True, the reasons are different. But the motivation is the same : to stay ahead of the competition. In my view, and based on my own experience, Whatsapp is being used as a light-weight social network built around messaging and optimized for mobile phones. In fact, I share a lot more stuff with friends and family on Whatsapp - including pictures/videos/messages - than I do on Facebook. The more Whatsapp satisifies my sharing needs, the less I use Facebook. And that is a competitive threat to Facebook. Instagram was similar - a light-weight social network built around photo-sharing. I think Zuckerberg is a deeply strategic thinker trying to avoid the pitfalls of the "Innovator's Dilemma". Both Instagram and Whatsapp are classic examples of what is described in Innovator's Dilemma - light-weight products that can slowly eat into the market share of the incumbent, and ultimately displace it. Edits : formatting.
- lifeisstillgood 13y ago
  yes yes and yes. But boy - 16 billion.
  - jmathai 13y ago
    The opportunity cost is much larger if they miss out. It's the difference between ponying up tons of cash to stay relevant or fading into obscurity.
    - nousernamesleft 13y ago
      But it in no way ensures they stay relevant. It is literally just blindly flailing around buying anything that gets a lot of users out of fear and having no idea how to maintain their position.
      - jmathai 13y ago
        It doesn't ensure they stay relevant but it's a better strategy than watching your target demographic leave your platform. It's a $19B investment in trying to keep people on Facebook. $20B if paired with Instagram and $24B if they had acquired SnapChat. The numbers sound crazy but they're trying to hold on to and grow a market cap that's currently $175B. Zuck has some steel nuts but it's what got him to the $175B number in the first place.
        nousernamesleft 13y ago
        >It doesn't ensure they stay relevant but it's a better strategy than watching your target demographic leave your platform. I don't see any evidence to support that claim. It is a different strategy, but I don't see any indication that it is better. Flushing a few billion dollars down the toilet is a different strategy too, but that doesn't make it better.

ozgune 13y ago

Except that people weren't paying to get a Hotmail account. WhatsApp users pay $1/year, so their revenues are around that of Twitter's.

robbiep 13y ago
you mean $1 once when they first install it? the 'pay this amount' was a well known scam message
- olegious 13y ago
  Android users pay an annual fee.
  - scrabble 13y ago
    My first year free just ran out. They sent me a message that I get to continue for another year for free. It's hard to believe anyone pays for this.
    - boomzilla 13y ago
      Have you been a heavy user? I have a sneaky feeling that they will let light users have it free, but start charging heavy users. That makes sense, because if you are a light user, there is not a lot incentive to pay.
      - hocuspocus 13y ago
        I use it every day and I got my free account expiration date upgraded to "lifetime". Admittedly, I'm a light user regarding bandwidth usage; I do share some pictures, but probably a lot less than the average user. I honestly don't think I know anyone who pays the annual fee.
      - mehrdada 13y ago
        Due to network effects, it makes very much sense to let frequent users ride freely (perhaps not bandwidth hogs, but frequent communicators with multiple friends), as they'll bring in and keep many other users in the system.

stusmall 13y ago

Not taking inflation into account. 400 million for 9 million users adjusted for inflation is a bit over $60/user

higherpurpose 13y ago

You mean almost at the height of the dotcom bubble? Maybe that should say something about this acquisition.

pdpi 13y ago
You mean one of the more sensible purchases amidst all the idiocy of the first dotcom bubble? I mean, I fail to see how buying Hotmail was a bad idea for Microsoft.

ulfw 13y ago

Hard to compare though. Microsoft had barely any internet/web users back then. They had zero email users. Facebook has a billion or so give or take. All of which can get Facebook messages in their mobile apps already. How much overlap is there with Whatsapp?

mdmarra 13y ago
> How much overlap is there with Whatsapp? This is the question. Apparently a sizeable number of teenagers and pre-teens have zero interest in FB. It's where their parents post cat pictures and make dinner plans. From what I understand, Kik, WhatsApp, and Snapchat are all what's "cool" with the under 18 crowd. This move may ensure that FB still has sufficient data to mine on this demographic in the future.

teacup50 13y ago

Scale matters. $400M vs $16B. How much of that $400M price was set based on $-per-user? On top of that, this was back in the first bubble, and we saw how that went.

Titanous 13y ago

Microsoft also paid $8.5 billion for 663 million Skype users in 2011, which works out to $12.82/user.

anges244 13y ago
You are comparing Skype to WhatsApp? Don't you think it's kind of apples and oranges? Skype had technology that Facebook itself uses for video chat and WhatsApp supposedly has a large user base which mysteriously enough is so different than FB user base, that it's worth $16b?
- movingahead 13y ago
  As someone who is a heavy user of both Whatsapp, GTalk/Hangouts and FB Messenger, I find Whatsapp to be much faster than others. So, there could be some technological value to this deal. Microsoft had its own Live Messenger and Lync too, so the acquisition in both cases was for the user base and the brand than technology IMO.

ams6110 13y ago

I'll admit to a distinct feeling, that I've started to lose touch with pop technology. I've never heard of WhatsApp. Though I had most definitely heard of Hotmail in 1998.

crucialfelix 13y ago
WhatsApp has huge global growth. I heard that little chirp everywhere I went in India. friends in Africa use it all the time. in countries with SMS charges, whatsapp is a good deal.
- nullspace 13y ago
  > in countries with SMS charges The funny thing is that in places like USA, you pay exorbitant amounts (~20 USD per month) for text messaging (when the real cost should be almost 0), yet it's still not caught on here - which is kinda sad.
  - atwebb 13y ago
    It's just because it matters more that we have all of our contacts than save $20 a month. I think you'd need higher priced SMS or a very large WhatsApp userbase.
    - nullspace 13y ago
      That is a very good point, even if you don't immediately realize the deeper implications. :) In India, you generally pay per text message - so if you can convince even 3 of your close friends to start using Whatsapp, you save (say) 20% of your phone bill. Here in US, if you are going to send more than a few texts a month, you are going to be paying 20 USD. So there is no real monetary incentive (initially) for you and two of your friends to switch to Whatsapp.
      - guelo 13y ago
        So why didn't Indian telecoms implement all-you-can-eat messaging to stop the erosion of users moving to WhatsApp?

loceng 13y ago

Facebook's only job is staying alive. That's the very minimum they can do, and is all they're trying to do.

anges244 13y ago
But they are trying only with tricks and short term solutions just to keep their stock prices high. Acquiring everything isn't a planned strategy for growth but rather a fear of the next facebook strategy, which obviously is not and couldn't be WhatsApp. Instagram maybe but still...
- loceng 13y ago
  If someone else acquired WhatsApp, would be the fear.

auctiontheory 13y ago

The parallels are striking : Whatsapp is to messaging today what Hotmail was to messaging in the late '90s. With 10 million users, you could grow 100x, or more. With 400 million users, 100x growth is harder.

vmavalankar 13y ago

You know we all feel the same http://vmavalankar.svbtle.com/why-facebook-bought-whatsapp http://vmavalankar.svbtle.com/why-facebook-bought-whatsapp

jpkeisala 13y ago

On the other hand Microsoft buying Nokia's phone business in a $7.2 billion seems like good bargain since they are supposedly have more than billion users. WhatsApp is just an App.

JTon 13y ago
Whatsapp is incredibly lean. I believe the only have 32 engineers working for them. I can imagine Nokia has much more expensive baggage in their name
Alterlife 13y ago
Sun Microsystems was aquired by Oracle (java, mysql, hardware division, patents and all) for $5.6 billion. Sun could probably be said to have more 'users' than what's app, but it's a different context for the user. Motorla Mobility was aquired for 12.5 billion. I don't even know what to compare the whatsapp aquisition to. The valuation seems quite insane.

smikhanov 13y ago

Microsoft/Hotmail deal normally considered to be at the top end of the price range of pre-bubble acquisitions. I.e. it was really expensive back then too.