Was WhatsApp overpriced?

As is to be expected, in the aftermath of the WhatsApp acquisition, there has been a lot of talk about how it was overvalued and Facebook payed too much. $19billion is a lot of cash, however you look at it.

But did Facebook overpay? Possbily.  

If we look back through history, a lot of big acquisitions have been decried as overvalued, sometimes rightly, sometimes not. When Facebook bought Instagram for $3billion there was a similar uproar, but now, things have worked out ok, and $3billion is looking more and more like a pretty good price.  When Google bought YouTube, there was an uproar over the valuation but no-one is now saying that wasn't a good purchase.  Incidentally, Google paid around $40 per active user when they bought YouTube, which is a slightly higher per-user cost than Facebook just paid for WhatsApp, at about $38 per user (although it's not really a relevant comparison in this case though, as you could argue that Google's projected monetisation model for YouTube is clearly different for Facebook and WhatsApp).

Facebook should have just built it

This is also a common line of argument. With $19billion  to play with, they could easily dedicate a decent dev team to building something awesome, and then market the hell out of it, possibly even incentivising user installs (If they wanted 450million users, they could give the first 450million installs $5 each!  disclaimer: app installed != active user).

My suspicion is if Facebook had built the app/platform themselves, it would have bombed.

Facebook as a company are becoming less and less focused, which is to be expected as their product becomes so multi-faceted, and are apparently getting worse at building fast/well. If they tried to dedicate a bunch of their guys to build it, it would be taking the opposite approach of WhatsApp - 32 engineers, 450million users, 99.9% uptime - all possible because they were so single-minded in their focus on the core of the product - You think an internal Facebook team could achieve those stats if they built the platform? I think that might be a stretch.  You think they would have been able push back on no advertising? no integration with the FB graph? No integration with existing FB messaging?  Every integration point is a potential pain point. Every pain point is a potential outage.

They also wouldn't be helped by their existing brand - people are wary of FB. Between the NSA scandal, their ongoing privacy policy changes and their *apparent* general disregard for their users I think people would be inclined to go to WhatsApp over a FB app.  As mentioned before, these days your phone is a social platform/graph in its own right - so the FB core product doesn't really have much more to entice users away from something like WhatsApp - Sure Google+ couldn't get the FB masses to budge, but their is no intrinsic value offered in FB that would really enhance an app platform like WhatsApp. In fact it's most likely the opposite and WhatsApp simplicity and absence of additional clutter in the product that makes it so appealing. It just works.

FB have promoted their messenger app pretty hard, and it hasn't been hugely successful. They have had to recently retire their email system. My gut feel is that an overly aggressive push for their home-rolled WhatsApp competitor would just serve to irk even more people and drive them away from their offering.

Stopping Google

So this is where it gets interesting.

WhatsApp apparently turned down a $10billion bid from Google, and finally chose to go with FB even when Google matched the $19billion offered.

Despite both being formidable tech giants, you might think there isn't that much real competition in the market place between Google and Facebook - Facebook email failed to make a dent in the world of email just as much as Google+ failed to make a real dent in Facebook's world of social networking. But, in my humble opinion, Google with WhatsApp could have been a game changer. For real.


Let's think about this:

• Google have Android - the most pervasive and widely used mobile OS available. Available on a range of devices, including relatively low-powered affordable ones (critical in developing markets)
• Google have strong working relationships with several hardware manufacturers with their Nexus hardware range, but now also have skin in the game having bought up part of Motorola and are now producing their own (suprisingly good) handsets
• Google have bout Nest (home automation software) - more on that below..

Google have the software, hardware and market dominance in the mobile space. Can you think of a reason Google couldn't/wouldn't take on the mobile carriers? They are building more and more infrastructure around the US, and in heavily populated areas is there any reason they couldn't shun the carriers traditional networks and create adhoc mesh networks - using the actual mobile devices to power the network. Sure it wouldn't work everywhere, but couple that with traditional mobile infrastructure and it is looking more and more like a viable option.


Now let's consider: 

• Google has the infrastructure, software and hardware to take on traditional carriers
• They have viable monetisation models across their products to make cost not a big deal, coupled with falling back on to a mesh network where available they could potentially offer people free mobile plans - have an android device and Google account? then call/surf/message for free - no ongoing costs
• Tied in with Nest home automation, that is a pretty promising value proposition