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    Facebook's Acquistion of Whatsapp

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    Anand Mishra
    Project Appraisal and Finance

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    Facebook's Acquistion of Whatsapp

    Uploaded by

    Anand Mishra
    42 views11 pages
    Project Appraisal and Finance

    Original Title

    Facebook’s Acquistion of Whatsapp

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    Project Appraisal and Finance

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    42 views11 pages

    Facebook's Acquistion of Whatsapp

    Uploaded by

    Anand Mishra
    Project Appraisal and Finance

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    You are on page 1of 11

    FACEBOOKS

    ACQUISTION OF
    WHATSAPP
    Seema Pujani, ITS Probationer 2014-15

    Why the deal


    In February 2014,
    Facebook purchased
    WhatsApp for $19.2 billion,
    whilst also making the
    founder a director of
    Facebook. The deal
    shocked most on Wall
    Street.

    Whatsapp:
    450 million users (at the time of
    the deal-In January, 2015 the
    figures rose to 700 million)
    70% active daily users
    1 million new user
    registrations/day

    Immense growth in a rapid


    fashion for a firm that hardly
    employs 50 odd people!

    Whatsapp Advantages

    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)

    What is in it for FB

    Increasing presence in the


    mobile market and creating
    a loyal customer base
    Advantages of cost and
    scale
    Adds to brand value
    Keeps rival Google out
    of the competition

    Current revenue model


    (based on subscription
    fee) not lucrative so
    could integrate
    Facebook with
    Whatsapp and/or
    undertake data mining
    and earn revenue from
    advertising

    What does the deal comprise


    It isnt a
    leveraged
    buyout or
    a debt
    fueled
    acquisitio
    n.
    It is a cash
    plus share
    deal.

    $4 billion in cash
    $12 billion worth FB shares
    $3 billion ESOP (Employee
    Stock Ownership Plan)
    With rise in FB stock, deal
    valued at about $21.4 billion by
    end of 2014

    In its current
    revenue model
    (with a 1$
    subscription),
    the deal would
    not make
    sense. Another
    36 years
    needed to break
    even. Changes
    ought to be
    made to the
    business model
    of whatsapp to
    generate $2.8

    One parameter
    on which the deal
    makes complete
    sense is when
    valuation is done
    on the basis of
    customer base.

    Verdict

    More critics than supporters of


    the acquisition: the revenue
    model criticized for its
    inability to monetize the user
    base with no advertising and
    little by way of profits
    FB targeting long run growth
    in future by nipping the
    competition in the bud and
    acquiring related social media
    (such as Instagram earlier for
    $1 billion)

    It seems sensible when


    seen in the light of
    benefits of synergy
    Changes already in the
    pipeline. For example,
    the feature of voice call
    made available in India
    for all Android users in
    whatsapp on 31st March,
    2015.

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