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Google's offer lacked the board seat Facebook gave up

Yesterday we mentioned that Facebook had plunked down a huge amount of cash to buy the WhatsApp messenger service. The purchase cost Facebook a whopping $16 billion in cash and stock.
 
A new report from Fortune claims that Facebook wasn’t the only major tech firm sniffing around WhatsApp. Google also reportedly made an offer to buy the company for $10 billion.
 
Google's offer was not only significantly less than the one made by Facebook, but the Google offer also reportedly didn’t come with a seat on the board as Facebook's did.
 
Many of our readers have commented that they are flabbergasted as to why such a simple app would be worth so much money to Facebook and the reasons are quite simple. The service has 450 million active users and is gaining one million new users each day. Many companies would kill for the information that can be skimmed from those users.
 
As Facebook CEO Mark Zuckerberg said in a conference call following the announcement, "WhatsApp is the only app we’ve ever seen with higher engagement than Facebook itself."

Source: CNN



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By amanojaku on 2/20/2014 1:50:30 PM , Rating: 2
I think his point is that Facebook overpaid for something that may not be relevant in a few years. WhatsApp could become the next ICQ. Facebook should have just saved that $16B, since it is also in danger of becoming irrelevant. Not for the next 5-10 years, but the decline has already started. Monthly growth has been declining, and it's not entirely due to saturation. Facebook is mostly an American phenomenon. It has little traction outside of the US except for a few countries. Even more damning is the exodus of young visitors for alternatives like Tumblr. Facebook's users are getting older, and older people tend to use social media less.


By lagomorpha on 2/20/2014 1:58:14 PM , Rating: 2
quote:
Facebook is mostly an American phenomenon. It has little traction outside of the US except for a few countries.


Which is probably the motivation for the purchase. Within the next couple months if you're a WhatsApp user but not a Facebook user expect a message like the following:

quote:
Congratulations *user* WhatsApp is dropping the $1/year fee, to continue WhatsApp service simply log on to your Facebook account. Don't have a Facebook account? Create one now!


It's going to be worse than when Google started forcing gmail/youtube accounts to merge or when Microsoft tried to start changing Skype accounts into Microsoft accounts.


By alpha754293 on 2/21/2014 9:48:12 AM , Rating: 2
That's an interesting point about the consolidation of services as the tech companies start merging. So they're on THAT phase of the cycle now, until at some point in the future, they're going to get a little too big for people to be comfortable with (or the management becomes lax as they're just WATCHING profits happen, almost as though magically and spontaneously). And then they will start withering and falling and dying, then they get broken back up in bankruptcy court, and then whole cycle starts all over again.

Yeah...it was pretty annoying when Google forced Youtube into Google accounts.


By ven1ger on 2/20/2014 2:15:40 PM , Rating: 2
Maybe that's why FB found value in the app, because of its users so seem to be predominantly outside of the US. As you stated, FB is mostly US, this will bring in many users to FB from outside the US, especially when they will require a FB account to use the app.


By amanojaku on 2/20/2014 3:26:49 PM , Rating: 2
That only proves the point that the purchase is silly. You know FB will integrate WhatsApp into its site. The reason WhatsApp became popular, outside of offering SMS over data, was the privacy: people can't browse your stuff on WhatsApp like they can on FB. Give it a year or two; I'm sure FB will fix that little problem. Plus, FB may be purchasing users it already has.

The only upside to this is that WhatsApp will be the first product FB owns that generates revenue from users instead of advertising. But at a dollar per user per year, the $400M earned annually will take close to 50 years to pay off the $19B (it's $19B, not $16B).


By Shlong on 2/20/2014 4:29:48 PM , Rating: 2
Not really, Instagram hasn't changed all that much since Facebook bought it. I've seen about 2 ads in the past 6 months (open the app multiple times a day) but that's about it.


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