I Thought Facebook’s WhatsApp Deal Was Crazy. Then I Did Some Math. – WSJ.com

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This article, I saw this morning, puts together a good argument why the cost Facebook paid for WhatsApp was justified.

There’s no disputing that Facebook paid a huge premium for an untested company in a hotly competitive communications sector. But it takes less than I thought to turn WhatsApp into a decent, if justifiable, business. And that doesn’t even count other benefits of scale, strategic defense and Google -rattling that are harder to quantify.

Turns out when you compare it to the wireless carriers such as Verizon’s purchase of their 45% stake in its Verizon Wireless joint venture the reasoning is clear.

At first, the numbers look as stark as you’d expect. We know that Facebook paid $42 for each of WhatsApp’s 450 million users. Verizon, by comparison, valued each of its roughly 97 million monthly contract connections at about $2,984.

Verizon collected about $669 for each of these post-paid connections last year, and made another $168 per subscriber from other sources.

What did WhatsApp collect for its service, which allows for unlimited and quick text messaging? What a pesky question. Basically zero. For math’s sake, let’s take the figure to 50 cents per user in 2014.

The analysis goes on from there. You can read the rest in the article. Looking to the future and WhatsApp’s recent announcement at Mobile World Congress about adding voice calls looks like it might have been worth it for Facebook to buy them now.

One last not about this. This could of been a defensive move by Facebook. Why let Google buy them.

via I Thought Facebook’s WhatsApp Deal Was Crazy. Then I Did Some Math. – WSJ.com.

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