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Earlier this year, in a slightly surprising move, Facebook acquired popular messaging app, Whatsapp, for £13.6 billion ($22 billion). You'd think that a company paying out that much would at least have a plan to make that money back, right?
It turns out that Facebook CEO, Mark Zuckerberg has no immediate plans for the company's latest mobile acquisition according to Reuters. The CEO admitted at an event in India that he has “no near-term plans to make money from the service.”
Facebook was originally set to buy Whatsapp for $19 billion but due to the company's increased stock value, the final bill rose to $22 billion, or £13.6 billion here in the UK.
Whatsapp works across all phone platforms, across borders without advertising. The app only charges users £0.69 or $0.99 a year after they've used it for a single year. Additionally, if you happen to get a new phone number before the subscription renews, then you'll end up with another year free, meaning that Whatsapp isn't making a ton of money on its own.
Since Facebook has no plans for Whatsapp, it's still very unclear as to why the company felt the need to shell out so much money for it.
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KitGuru Says: Honestly, I don't think anyone understands why Facebook spent so much money on Whatsapp, especially considering that it only spent $2 billion on Oculus, which has much greater money making potential. What do you guys think Facebook should do with Whatsapp? Will the company ever recoup its $22 billion investment on the service? Source: Reuters
I don’t understand… people pay for an IM service that you can get for free with a different app? And better yet, on a phone that they already pay to be able to send messages on?
lemme tell you a secret xD Whatsapp renewed me the subscription for another free year =P using it for 3 years now and i haven’t payed a thing xD Besides, it is actually a very cool and light app. In Holland, everybody uses it, for instance
I’ve been using it for like 3 years and didn’t even know it was charging a subscription? Heh.
Because buying off the competition is always to way to go when you’re that big 😉
I paid the £0.69 for it! I knew I could get it for free, but I thought 69p, saves arsing about. I’m a tight fucker, but that’s a steal!
The economist ran an interesting piece about this about a month ago. Essentially the reason these companies are worth so much POTENTIALLY is because there’s no quantifiable, standardized way of assessing their actual worth. It’s all in estimated value based on the number of regular users, even if the service doesn’t actually charge that much (if anything) for said service.
One hypothetical reason for the value is that, given enough users, you can start slipping in ads to make ad revenue while allowing the service to remain free. SoundCloud is starting to experiment with this business model (to groans of protest), and Youtube has proven in spades that there is money to be made in such a market. The alternative is maintaining a premium business model, like Vimeo; in this way, the product is monetized without lowering the perceived “premium” standard of the site with cheap ads.
My bet is that Facebook is simply trying to drum up some way to monetize the service through advertising in a more opaque way without driving away long-time users. It makes sense to spend a lot of time on this, considering they have $22B riding on it.
As far as I understood the real plus for buying up this app was that it is the dominant communication platform in emerging markets like india, etc. Its written in java so works on all the old feature phones. Some places use it as a way of paying for things as well. They just purchased the control over one of the biggest communication platforms out there.