WhatsApp Acquisition
Why Facebook paid $19 billion for an app with 55 employees and zero revenue — and why it turned out to be a bargain.
WhatsApp had no revenue. Not zero profit, zero revenue. The messaging app reached 600 million users by doing only one thing. Delivering messages cheaper than SMS. Users paid a tiny annual subscription, $1 per year. That covered server costs, but generated essentially nothing for the business. Yet Facebook paid $19 billion in 2014. The price seemed insane, but Facebook saw something competitors missed. WhatsApp had user distribution. The network was growing fastest in developing countries, where Facebook's own growth had plateaued. 600 million engaged users represented something more valuable than revenue. Platform reach that could be monetized later. Facebook acquired the distribution before having a monetization model.
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