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Facebook's acquisition of WhatsApp
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- 2. Facebook Founded February 4,2004 Headquarters Menlo Park, California, US Founders Mark Zuckerberg Eduardo Saverin Andrew McCollum Dustin Moskovitz Chris 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
- 3. WhatsApp Founded 2009 Headquarters MountainView, California, US Founders Jan Koum Brian Acton CEO Jan Koum Type Instant messaging License Proprietary Facebook’s acquisition of WhatsApp
- 4. Facebook’s acquisition ofWhatsApp Total amount for acquisition - $19 Billion or INR 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
- 5. Facebook’s acquisition ofWhatsApp
- 6. It was adeal 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 for a 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
- 7. Facebook’s acquisition ofWhatsApp
- 8. Facebook’s acquisition ofWhatsApp
- 9. With the desktopmarket 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
- 10. Facebook’s acquisition ofWhatsApp
- 11. Facebook earns majorityof 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
- 12. Facebook’s acquisition ofWhatsApp 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
- 13. Facebook’s acquisition ofWhatsApp 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 users If these assumptions hold true, WhatsApp can make fairly good profits because of its low cost business model
- 14. Facebook’s acquisition ofWhatsApp STRENGTHS • 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
- 15. Facebook’s acquisition ofWhatsApp OPPORTUNITIES • 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