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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
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
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 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