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My ($19B) cents on WhatsApp acquisition

facebook-whatsappI recently came across a chart summarising the cost per user of famous tech acquisition, indicating that WhatsApp acquisition by Facebook could somewhat be justified based on the relatively low cost per user paid ($35.56) compared to other tech acquisitions. While I can’t really comment on if $35 is a fair price to acquire users, I don’t believe it is the correct amount.

First of all, according to SEC filings, out of the $19B Facebook paid :

  • $12B are in Facebook stock, based on today’s price, which is more or less monopoly money since I doubt anyone from WhatsApp will liquidate, especially with the founders  joining Facebook board ;
  • $3B are in restricted Facebook stock to retain WhatsApp employees (aka signing bonus, no one will cash out before years) ;
  • Only $4B is in cash.

So, if we assume that only the $4B are used to acquire the 450M WhatsApp users (the rest being acqui-hire in monopoly money), we’re talking here about a cost of $8,8 per user. An if you take into the equation the fact that Tencent, Facebook biggest competitors, could had have eyes on WhatsApp (it’s just an intuition but would have been a smart move to conquest US and Europe markets), I think the cost per user is even lower than $8 (since part of the price is motivated by defending Facebook presence in his markets).

Not bad for a community of users with very high usage, right?