This article makes quite a bit of sense.
In reality, Facebook can afford to spend 11% of its already sky-high
$180 billion market cap in the hope of capturing nearly a billion
eyeballs, so the valuation doesn’t have to make sense to the social
network. Zuckerberg is just playing with funny money.
The comparison of Verizon’s nearly 100 million subscribers that spend
about $70 a month to unmonetized users of a messaging app makes little
sense. And Verizon is an established market leader with essentially two
competitors while WhatsApp competes with dozens of other messaging apps.
The competitive barriers are in now way comparable.
Yes Facebook paid $19 billion for a messaging app when there are perhaps 5 that I have heard of people using. All of them are very similar and are really not worth $19 billion to tell the truth. I mean I cannot tell much of a difference between Snapchat, Whatsapp, Kik or any of the others. They do different things and have different amounts of installed base but $19 billion worth?
I'm not even sure how Facebook will make that money back because I have serious problems with the advertising model when it comes to free apps. The only time I have ever clicked through a mobile ad was in error. The top of the ad would sometimes stick up onto the regular part of an app that I was using. I ended up uninstalling the app and getting something that was similar.
In any case I think the bubble is in place and something will come along and pop it in the next few years. I thought it would be something like Facebook and Twitter new users finally slowing down but it seems to be inflating right along. But I think sooner rather than later we will have our Pets.com at the Super Bowl moment. Could $19 billion for Whatsapp be it?
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