Facebook's acquisition of WhatsApp

15
Facebook’s acquisition of WhatsApp

Transcript of Facebook's acquisition of WhatsApp

Facebook’s acquisition of WhatsApp

FacebookFounded February 4, 2004

Headquarters Menlo Park, California, US

Founders Mark ZuckerbergEduardo SaverinAndrew McCollumDustin MoskovitzChris Hughes

CEO Mark Zuckerberg

Revenue US$7.87 billion (2013)

Net income US$1.50 billion (2013)

Total assets US$17.89 billion (2013)

Facebook’s acquisition of WhatsApp

WhatsAppFounded 2009

Headquarters Mountain View, California, US

Founders Jan KoumBrian Acton

CEO Jan Koum

Type Instant messaging

License Proprietary

Facebook’s acquisition of WhatsApp

Facebook’s acquisition of WhatsApp

THE DEALTotal amount for acquisition - $19 Billion

orINR 1158810036270

It includes:• $4 billion in cash• $12 billion worth of Facebook shares• $3 billion in restricted stock units

Jan Koum to join as director of Facebook

Facebook’s acquisition of WhatsApp

It was a deal that surprised some, shocked many, and left some gaping at the wall in sheer amazement. This is what Mark Zuckerberg did to the analysts of the financial world and to the general public when he announced that Facebook had decided to buy 5-year old WhatsApp for a whopping 19 billion USD!

But WHY? Let’s have a look..

• 450 million users• 70% active daily users• 1 million new user registrations/day

Immense growth in a rapid fashion fora firm that hardly employs 50 odd people!

How is it possible?

Thanks to WhatsApp’s powerful features:• Rapid text messaging• Engaging private and group chat options• Quick file sharing • Sleek user interface• Minimum system requirements and data usage• Freemium Model (free usage first year, $0.99

from second year)

Facebook’s acquisition of WhatsApp

Facebook’s acquisition of WhatsApp

Facebook’s acquisition of WhatsApp

With the desktop market saturating and smartphone clientele exponentially growing,

Facebook has been looking to establish a stronger presence in the mobile market

FB App and Messenger reach limited to FB Users. Only Moderate Successes.

Facebook was desperately looking for a turn-around in the mobile segment

The 450 million “content” mobile users of WhatsApp perfectly filled the void

Facebook’s acquisition of WhatsApp

Facebook’s acquisition of WhatsApp

Facebook earns majority of its revenues from just US and

Canada. WhatsApp will now give it a good complementary geographic

presence.

By buying WhatsApp, Zuckerberg has also kept Google out, a rival

which had also been courting WhatsApp for possibly an even

higher price!

Facebook’s acquisition of WhatsApp

Facebook’s acquisition of WhatsApp

DEAL VALUE – USER ANGLE

$42

$128

$80

$60

From the users point of view, $19 billion for 450 million users translates to ~$42 per user, which is much lesser than the value of a Facebook ($128), Twitter ($80) or a

LinkedIn user ($60).So if the users of WhatsApp can be fairly relied on, the acquisition value can be counted rational to an extent

Facebook’s acquisition of WhatsApp

DEAL VALUE – REVENUE ANGLE

Presently WhatsApp incurs only marginal expenses in terms of:

• Marketing costs• Infrastructure costs• Employee costs

In terms of revenue, let us assume:• Zuckerberg streamlines subscription

system• WhatsApp indeed reaches 1 billion

usersIf these assumptions hold true, WhatsApp can make fairly good profits because of its low cost business model

Facebook’s acquisition of WhatsApp

SWOT ANALYSISSTRENGTHS

• Loyal customers• Market share leadership• Available for all platforms• Strong management• Low cost• Brand name

WEAKNESSES

• Competitive market• Lack of diversification• Weak distribution network• Only works with a data plan or

WiFi

Facebook’s acquisition of WhatsApp

SWOT ANALYSISOPPORTUNITIES

• Increased demand for smartphones

• Recognition of the application• Modernization of people• Continued development of

technology platforms• Advancement of technology

THREATS

• Competition• Product substitution• Similar applications and that too

free