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>"There is no metric by which Whatsapp is worth 19B, except for the fact that Facebook can spend that much money." More "did" than can. Something is worth what

by lumens 12y ago

>"There is no metric by which Whatsapp is worth 19B, except for the fact that Facebook can spend that much money." More "did" than can. Something is worth what someone will pay. Why was FB willing to pay $19B? The answer is somewhere between what those users are worth to FB and the threat to FB's (very real) business that WhatsApp represented. This doesn't seem bubblish to me.

Chinjut 12y ago
The prices in every bubble are prices that someone _did_ pay. Possibly with foolish expectations; at any rate, at a level which was not sustained.
IgorPartola 12y ago
Another way to look at it is that FB is dying because simpler and more appealing competitors (Snapchat, Instagram, WhatsApp) are popping up that are threatening to grab FB's users' interest more. FB is faced with a quick death by losing a major share of its users over the course of 1-2 years, and the necessity to buy up the competition while it's still able to. I think that's actually a decent strategy: buy up these other apps and establish dominance in all the niche social networking corners. It'll last them maybe a decade I think. The problem is that these disruptive social networks don't make money. Acquiring them is just a way for FB to not lose money. So eventually FB's coffers dry out while more and more niche social networks pop up to steal its users. My understanding is that social networks are a generational thing. Even if FB was perfect in every way, no market maven teenager (for social networks the market mavens are teenagers) wants to hang out with their aunt. The next generation will stop watching Yo Gabba Gabba, grab their iPhone 9's and want to get on a social network that's separate from their parents. Because of this, I don't see a general purpose social network surviving for longer than 10-12 years and maintaining market dominance.
- lbotos 12y ago
  What if, that social network was built by 5 people, college aged, and they decided to use FB login to save some time developing because they are trying to see if this thing is worth building. A very real probability. FB won't be the powerhouse that it is today, but it's deeply entrenched in our internet that there is value in the social data, not the "blue room" product they offer for free now. (I hate FB, but I get it.)
  - IgorPartola 12y ago
    Do you think if all they provide is the service to store credentials they'd be worth what they are worth now?
    - jat850 12y ago
      I don't know much about Facebook's current offerings, but the answer to your question might depend on what other ubiquitous services they offer now or in the future. Maybe they'll become equally entrenched in the online payment market, or things of that nature. I don't and can't know if that will leave them at their 235B market cap, or if it will be lower or higher.
  - marcusgarvey 12y ago
    Funny. I can't recall where but a few days ago I overheard a teenage say something like, "I wanted to make a Tinder account but I didn't have a FAcebook, so I had to go make that first." Mind you, it seems like a really low quality user for FB and not something I would want to hang a bubbilicious valuation on for them -- unless FB's able to track her activity off FB as well. And I think this is the case.
    - mcintyre1994 12y ago
      Actually I wonder how Facebook's user tracking is actually dealing with mobile users who only use their mobile app. It seems like they'd potentially lose a lot of tracking info unless they can track an app login through the mobile browser. I wonder if this is part of the reasoning for their increasing centralization by offering a browser and supposedly actually hosting highly shared content.
netcan 12y ago
"Something is worth what someone will pay" I've never been to keen on that statement. It approximates something about fairness. It's expresses something about subjective worth. But, we're talking about something with a fairly objective, if ambiguous value. The price of something may be what someone will pay. For the value of something... I don't think this holds true. The value of a stock is objective, it's the future incomes discounted or somesuch. If you pay more than that you over payed.
- nbouscal 12y ago
  The value of a share of a stock for a typical investor is net present value of future cash flows, but the value of an entire company to one of its competitors can be something very different. As others in the thread have mentioned, the strategic value of removing a competitor can be significant.
TeMPOraL 12y ago
Only $2B out of those $19 were paid in actual cash, right? So the remaining $17B can still disappear at any time?
- rqebmm 12y ago
  The remainder was in FB stock. Personally I think the amount of stock they paid points to FB's acknowledgement that they are overvalued, i.e. part of a bubble.

by lumens 12y ago

Chinjut 12y ago

The prices in every bubble are prices that someone _did_ pay. Possibly with foolish expectations; at any rate, at a level which was not sustained.

IgorPartola 12y ago

Another way to look at it is that FB is dying because simpler and more appealing competitors (Snapchat, Instagram, WhatsApp) are popping up that are threatening to grab FB's users' interest more. FB is faced with a quick death by losing a major share of its users over the course of 1-2 years, and the necessity to buy up the competition while it's still able to. I think that's actually a decent strategy: buy up these other apps and establish dominance in all the niche social networking corners. It'll last them maybe a decade I think. The problem is that these disruptive social networks don't make money. Acquiring them is just a way for FB to not lose money. So eventually FB's coffers dry out while more and more niche social networks pop up to steal its users. My understanding is that social networks are a generational thing. Even if FB was perfect in every way, no market maven teenager (for social networks the market mavens are teenagers) wants to hang out with their aunt. The next generation will stop watching Yo Gabba Gabba, grab their iPhone 9's and want to get on a social network that's separate from their parents. Because of this, I don't see a general purpose social network surviving for longer than 10-12 years and maintaining market dominance.

lbotos 12y ago
What if, that social network was built by 5 people, college aged, and they decided to use FB login to save some time developing because they are trying to see if this thing is worth building. A very real probability. FB won't be the powerhouse that it is today, but it's deeply entrenched in our internet that there is value in the social data, not the "blue room" product they offer for free now. (I hate FB, but I get it.)
- IgorPartola 12y ago
  Do you think if all they provide is the service to store credentials they'd be worth what they are worth now?
  - jat850 12y ago
    I don't know much about Facebook's current offerings, but the answer to your question might depend on what other ubiquitous services they offer now or in the future. Maybe they'll become equally entrenched in the online payment market, or things of that nature. I don't and can't know if that will leave them at their 235B market cap, or if it will be lower or higher.
- marcusgarvey 12y ago
  Funny. I can't recall where but a few days ago I overheard a teenage say something like, "I wanted to make a Tinder account but I didn't have a FAcebook, so I had to go make that first." Mind you, it seems like a really low quality user for FB and not something I would want to hang a bubbilicious valuation on for them -- unless FB's able to track her activity off FB as well. And I think this is the case.
  - mcintyre1994 12y ago
    Actually I wonder how Facebook's user tracking is actually dealing with mobile users who only use their mobile app. It seems like they'd potentially lose a lot of tracking info unless they can track an app login through the mobile browser. I wonder if this is part of the reasoning for their increasing centralization by offering a browser and supposedly actually hosting highly shared content.

netcan 12y ago

"Something is worth what someone will pay" I've never been to keen on that statement. It approximates something about fairness. It's expresses something about subjective worth. But, we're talking about something with a fairly objective, if ambiguous value. The price of something may be what someone will pay. For the value of something... I don't think this holds true. The value of a stock is objective, it's the future incomes discounted or somesuch. If you pay more than that you over payed.

nbouscal 12y ago
The value of a share of a stock for a typical investor is net present value of future cash flows, but the value of an entire company to one of its competitors can be something very different. As others in the thread have mentioned, the strategic value of removing a competitor can be significant.

TeMPOraL 12y ago

Only $2B out of those $19 were paid in actual cash, right? So the remaining $17B can still disappear at any time?

rqebmm 12y ago
The remainder was in FB stock. Personally I think the amount of stock they paid points to FB's acknowledgement that they are overvalued, i.e. part of a bubble.