MG Siegler has been writing recently about the "great unbundling" of Facebook and how mobile apps are increasingly good at one thing only: Instagram at sharing Photos, Paper for reading the news, and now WhatsApp + Messenger for communication. It's becoming increasingly true as we see Facebook trying to buy the new dominant players in any space that could be a threat in the areas it holds dear: sharing photos, statuses, or anything else it deems important.
I would have to think that the stock drop is due to the price they're paying for a startup that had $8 million in funding.
That and the way their announcement basically indicated they were happy to leave WhatsApp and its uber-smart and now-uber rich engineering team alone in its own $1/user/year ad-free bubble, on course to break even some time around the point mobile phones become obsolete. It didn't exactly scream we had to pay that much but we've really thought this through
There's that, and there's also the type of investors.
Since retail investors can trade after-hours, we can assume that the people responsible for the drop are either professionals or retail, which allows for irrational selling.
Also, the stock market is a market. So there could be institutional investors shorting bad plays from the individual investors and aggressively selling the stock (since after-hours doesn't have as many traders, it's a good bet to short until market opens tomorrow).
The only factors I personally see to determine Facebook's return on investment/share price are 1. $ per user, 2. potential user growth combining Facebook & WhatsApp, 3. time; which all seem pretty lackluster for the amount paid in the acquisition.
As a heavy Facebook user, The weakening of the average users' engagement with Facebook is palpable at this point. Maybe the number of people with a "utility Facebook account", for when they really need it, is growing but the energy of the site is clearly shrinking.
The thing is that Facebook when it started was an ideal site for those who otherwise didn't "know" the net/online-world. But that naturally changed. People became more sophisticated in their consumption and more average people transformed trollish people. Together, this clearly reduces engagement to Facebook.
In case you're not actually trolling, here is why.
Because a change in market price reflects a change in the midpoint of opinion of people on the future value of Facebook, who are willing to put their money where their mouth is with regards to their opinion -- these are not the opinions of idle chatterboxes.
As such, stock price movement in response to news is a very valuable critique of a company's actions. A change in stock price is arguably more objective and valuable information than any random blogger or columnist whose opinion might be published here on HN.
Because it adds to the cost of the acquisition. If their market cap goes down 5% as a result then that's an extra cost of ~$8B, for an overall cost of $27B.
No, seriously. Everpix DOMINATED WhatsApp on every possible metric: social networks/sharing, user commitment, revenue, advertising information, and long-term potential. Anyone can (and will) switch instant messenger networks on a whim. There's literally no barrier to keep me from telling friends to contact me on Hangouts from now on.
A photo site tells you where people go, what they do, who they hang out with, how they spend their money, and also requires a huge commitment from users since it's a burden to re-upload photo libraries to other sites. Plus they enjoyed a steady revenue stream of $50/year or whatever, AND they could rely on the diminishing cost of storage and bandwidth over time.
To say nothing that Facebook has no photo library feature beyond selected individual uploads (which yield relatively little information about location, habits, friends, etc). They really could have used Everpix. (Or Apple could have finally obtained a usable web service.) But Facebook already has a messenger application. Hell, they have several depending on how you count their properties. What the hell does WhatsApp add to their portfolio, beyond a crappy name and a whimsically unattached user base?
I'm just baffled at this point. I guess $20b for Snapchat will be tomorrow's acquisition. Then $50b for AIM, why not.
Why not saying: another 230 million may be added in the next nine months... If you know qq or wechat, you will understand IM has serious market value...
Of course they're unattached. It's just another instant messenger. Or are people still loyal to ICQ, AIM, MSN Messenger...?
(Even worse, WhatsApp relies on teenagers. How many social circles endure beyond high school? Do you still IM people you knew back then... or even as recently as two years ago?)
Maybe adults will fall back on the best messenger based on technical merit (probably Hangouts?), but WhatsApp is neither sophisticated nor particularly appealing for the long term. I'll put down money that it'll be forgotten within the decade. What the hell was Facebook thinking?
Existential threat combined with huge non-US userbase.
What happens if Google buys WhatsApp? Or if Microsoft buys them?
Facebook has saturated the US market and is, in fact, losing people. I suspect Europe is close if not already there. So, the battle has shifted to other countries.
Everpix is an instagram competitor--it is a photo sharing app--and should be compared to instagram. BTW, in case you haven't noticed--Facebook bought instagram last year, and even before that it allow users to attach meta data (location, etc.) to their photo uploads.
Whatsapp is a text messaging app, and should be compared to iMessage, Google Talk, Skype, and SMS. In that regards, its clear why WhatsApp succeeded--it was the default messaging app in dozens of countries.
The price is baffling, sure, but the reason that Whatsapp survived and Everpix did not is pretty clear. Whatsapp scaled, and Everpix did not. Text messages take up a few bytes; pictures take up a few megabytes. They could probably fit multiple users' entire messaging histories in the space that a single photo took up. Bandwidth costs--also a fraction of Everpix's. Rent and other fixed costs--definitely a fraction of Everpixs, which chose to situate itself in one of the most expensive locations in the world for a business with minimal revenue.
5% is what, 8-9bil market value? This deal gives out 12bil in stock, so the loss in market cap is less than the dilution of shares from the deal.
In other words, in hearing that 12bil of worth was being taken away from shares, only 75% of that was realized in the fall, making this a net gain in share price (not counting cash). If you count cash, this actually seems pretty neutral.
Doesn't that assume everyone has priced in the news already? I mean, it might fall another 5% by this time tomorrow and completely invalidate your thesis - having said that it seems to have recouped some of the loss already. I just think it's going to take more than a few hours to see the full effect.
If this were an all stock deal, and the market cap had fallen by $12B (assuming $12B stock given out), that would mean the market were valuing WhatsApp at $0 as an asset.
If facebook had fallen in value by more than the purchase price, that would mean the market is saying WhatsApp has negative value, even if it had been given to facebook for free (though it could also mean a loss of faith in facebook leadership).
Any loss in market cap following the acquisition means the market is valuing the deal as having negative net value to facebook.
That's only if you believe that Whatsapp is worth $19B (which I don't). If it's not worth $19B, then it's Facebook throwing away $4B cash and diluting themselves for $12-15B.
Companies FB could have bought for around $20B: Linkedin,
Whole Foods, Broadcom, The Gap, etc.
There is no sort of metric that makes sense to purchase this product for $19B. Even if every user paid $1/yr, that's paying $19B for $450M revenue stream, or 40 times revenues. It's insane.
There must have been other bidders – such as Google, Apple, Microsoft – who saw WhatsApp as an end-around Facebook's social dominance.
So imagine one of those other bidders had won, at a lesser price. Facebook might still have taken a 5% hit, facing a newly-empowered competitor. At least now, as with Instagram, the threat has been absorbed into the mothership.
It's a rich price, but arguably strategically justified.
The people who criticized the prices paid for YouTube and Instagram were very wrong. Also wrong were those who said Facebook was crazy for not accepting Yahoo's buyout offer, or that private investors were crazy for giving Facebook its rich pre-IPO valuations. Facebook keep chugging along, knowing and confident in its understanding of the opportunities and threats.
True, but the only thing I've ever heard it praised for is how well it handles multi-person video chats. I've never heard of anyone using it for purely text chats. Maybe that will change, but it's not an SMS replacer yet at any level.
Thank you. This is the justification I was looking for. It felt like this acquisition was driven by a fundamentally different motivation than the Instagram acquisition and the Snapchat offer, but I couldn't put my finger on it: Facebook wasn't paying $40/user, they weren't paying $0.5B/engineer, and (unlike Instagram or Snapchat) they were not scared of WhatsApp as a competitor (at least not in terms of mindshare, because there's no evidence that WhatsApp was stealing the engagement of Facebook users)--they were just scared of what would happen if Google bought them first. Preventing Google from getting a leg up in the social space (especially since Hangouts is actually a very good product, despite having what I presume to be a comparatively low active user base) is probably worth far more than $16B to them, so in that sense they got a good deal. But admitting that strategy to their shareholders might not play well.
It will be interesting to see how this strategy works moving forward. If they're not careful, it could become an easy way for Google/Apple/Amazon/Microsoft to bleed Facebook dry.
By this email, please accept this formal notice and takedown request for the following content on the GitHub site. I am starting with these requests to ensure you will take action on our request. We will have follow-on requests, as the list of infringing content below is not exhaustive.
Specifically:
The following URLs use of the WhatsApp name and logo, use of other WhatsApp content, unauthorized use of WhatsApp APIs, software, and/or services, and provision of software and services related to WhatsApp infringes on WhatsApp's copyrights and trademarks, including those related to WhatsApp's name and logo. WhatsApp's trademarks are registered in the United States and countries throughout the world.
Note that:
• Trademarks aren't subject to the DMCA.
• APIs aren't copyrightable.
• TOU violations aren't subject to the DMCA.
Given that the letter isn't clearly formatted as a DMCA takedown (though it uses some sample language) the effect is ... curious.
After-hours price changes are pretty much meaningless. After many years of seeing dramatic after-hours changes contradicted when the market opens, I've concluded that generally you should just ignore what happens after hours.
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[ 4.6 ms ] story [ 85.9 ms ] threadI would have to think that the stock drop is due to the price they're paying for a startup that had $8 million in funding.
Since retail investors can trade after-hours, we can assume that the people responsible for the drop are either professionals or retail, which allows for irrational selling.
Also, the stock market is a market. So there could be institutional investors shorting bad plays from the individual investors and aggressively selling the stock (since after-hours doesn't have as many traders, it's a good bet to short until market opens tomorrow).
The only factors I personally see to determine Facebook's return on investment/share price are 1. $ per user, 2. potential user growth combining Facebook & WhatsApp, 3. time; which all seem pretty lackluster for the amount paid in the acquisition.
The thing is that Facebook when it started was an ideal site for those who otherwise didn't "know" the net/online-world. But that naturally changed. People became more sophisticated in their consumption and more average people transformed trollish people. Together, this clearly reduces engagement to Facebook.
What use is reporting or reading about stock movements within a day?
Because a change in market price reflects a change in the midpoint of opinion of people on the future value of Facebook, who are willing to put their money where their mouth is with regards to their opinion -- these are not the opinions of idle chatterboxes.
As such, stock price movement in response to news is a very valuable critique of a company's actions. A change in stock price is arguably more objective and valuable information than any random blogger or columnist whose opinion might be published here on HN.
Does that make it clear?
Or as some brokers call it "sell into strength".
It's about profit taking and has nothing to do with "critique of a company's actions" or objectivity.
Surely not THEIR money. Someone else's money, with a fee for "expenses"
No, seriously. Everpix DOMINATED WhatsApp on every possible metric: social networks/sharing, user commitment, revenue, advertising information, and long-term potential. Anyone can (and will) switch instant messenger networks on a whim. There's literally no barrier to keep me from telling friends to contact me on Hangouts from now on.
A photo site tells you where people go, what they do, who they hang out with, how they spend their money, and also requires a huge commitment from users since it's a burden to re-upload photo libraries to other sites. Plus they enjoyed a steady revenue stream of $50/year or whatever, AND they could rely on the diminishing cost of storage and bandwidth over time.
To say nothing that Facebook has no photo library feature beyond selected individual uploads (which yield relatively little information about location, habits, friends, etc). They really could have used Everpix. (Or Apple could have finally obtained a usable web service.) But Facebook already has a messenger application. Hell, they have several depending on how you count their properties. What the hell does WhatsApp add to their portfolio, beyond a crappy name and a whimsically unattached user base?
I'm just baffled at this point. I guess $20b for Snapchat will be tomorrow's acquisition. Then $50b for AIM, why not.
(Even worse, WhatsApp relies on teenagers. How many social circles endure beyond high school? Do you still IM people you knew back then... or even as recently as two years ago?)
Maybe adults will fall back on the best messenger based on technical merit (probably Hangouts?), but WhatsApp is neither sophisticated nor particularly appealing for the long term. I'll put down money that it'll be forgotten within the decade. What the hell was Facebook thinking?
Existential threat combined with huge non-US userbase.
What happens if Google buys WhatsApp? Or if Microsoft buys them?
Facebook has saturated the US market and is, in fact, losing people. I suspect Europe is close if not already there. So, the battle has shifted to other countries.
Everpix is an instagram competitor--it is a photo sharing app--and should be compared to instagram. BTW, in case you haven't noticed--Facebook bought instagram last year, and even before that it allow users to attach meta data (location, etc.) to their photo uploads.
Whatsapp is a text messaging app, and should be compared to iMessage, Google Talk, Skype, and SMS. In that regards, its clear why WhatsApp succeeded--it was the default messaging app in dozens of countries.
The price is baffling, sure, but the reason that Whatsapp survived and Everpix did not is pretty clear. Whatsapp scaled, and Everpix did not. Text messages take up a few bytes; pictures take up a few megabytes. They could probably fit multiple users' entire messaging histories in the space that a single photo took up. Bandwidth costs--also a fraction of Everpix's. Rent and other fixed costs--definitely a fraction of Everpixs, which chose to situate itself in one of the most expensive locations in the world for a business with minimal revenue.
Dropbox? It's a place to store photos. Who cares really?
WhatsApp has a few hundred million people paying $1/year
Everpix had 250k in revenue, total over the company's entire existence.
In other words, in hearing that 12bil of worth was being taken away from shares, only 75% of that was realized in the fall, making this a net gain in share price (not counting cash). If you count cash, this actually seems pretty neutral.
If facebook had fallen in value by more than the purchase price, that would mean the market is saying WhatsApp has negative value, even if it had been given to facebook for free (though it could also mean a loss of faith in facebook leadership).
Any loss in market cap following the acquisition means the market is valuing the deal as having negative net value to facebook.
That's the zinger right there. It could be anything, from "WhatsApp is worthless" to "This tea leaves are turning green, time to dumb Facebook stock"
Companies FB could have bought for around $20B: Linkedin, Whole Foods, Broadcom, The Gap, etc.
There is no sort of metric that makes sense to purchase this product for $19B. Even if every user paid $1/yr, that's paying $19B for $450M revenue stream, or 40 times revenues. It's insane.
So imagine one of those other bidders had won, at a lesser price. Facebook might still have taken a 5% hit, facing a newly-empowered competitor. At least now, as with Instagram, the threat has been absorbed into the mothership.
It's a rich price, but arguably strategically justified.
The people who criticized the prices paid for YouTube and Instagram were very wrong. Also wrong were those who said Facebook was crazy for not accepting Yahoo's buyout offer, or that private investors were crazy for giving Facebook its rich pre-IPO valuations. Facebook keep chugging along, knowing and confident in its understanding of the opportunities and threats.
>What would happen
That would be more of a problem for Microsoft's Skype.
And yes, social threats that have half-a-billion active users, and still-accelerating adoption, definitely deserve Facebook's acquisition attention.
It will be interesting to see how this strategy works moving forward. If they're not careful, it could become an easy way for Google/Apple/Amazon/Microsoft to bleed Facebook dry.
By this email, please accept this formal notice and takedown request for the following content on the GitHub site. I am starting with these requests to ensure you will take action on our request. We will have follow-on requests, as the list of infringing content below is not exhaustive.
Specifically:
The following URLs use of the WhatsApp name and logo, use of other WhatsApp content, unauthorized use of WhatsApp APIs, software, and/or services, and provision of software and services related to WhatsApp infringes on WhatsApp's copyrights and trademarks, including those related to WhatsApp's name and logo. WhatsApp's trademarks are registered in the United States and countries throughout the world.
Note that:
• Trademarks aren't subject to the DMCA.
• APIs aren't copyrightable.
• TOU violations aren't subject to the DMCA.
Given that the letter isn't clearly formatted as a DMCA takedown (though it uses some sample language) the effect is ... curious.