Did anyone else read about Facebook buying Whatsapp for $19 Billion? That looks like this numerically – $19,000,000,000… Unless your name is Jamie Dimon, Janet Yellen or Bill Gates, then that type of money is astronomical, and something that 99.9% of people will never even come close to ever seeing. I can’t even picture in my head how much money that is physically, so I went searching the internet and found this:

1 BillionTimes that by 19 and you have what Facebook paid for Whatsapp.

At this point you might be wondering what on earth a Whatsapp is? Well for those of you that are not aware, it is a messaging application that uses data packets of the internet to send and receive messages, rather than the traditional carrier network and SMS.

Apparently Whatsapp has 450 million users, who each pay $1 per year to use the service (less for longer periods of time). That means that it will take 42 years for Facebook to recover it’s initial investment at the current user base and subscription cost, and that doesn’t even take into account server costs, bandwidth, staff, marketing etc. This isn’t to mention that the first year of using Whatsapp is free, so many people will likely move away from the service after that initial period is finished.

I don’t know about you, but to me it looks like Facebook WAY overpaid for this. After all,  there is nothing preventing users from moving to a 100% free service offered by a competitor. 42 years is a long time and I am sure there will be some new app that comes out within the next couple of months or years that will make Whatsapp look the same as MySpace does to Facebook or Altavista does to Google. The tech space moves so quickly, and paying that kind of money on expected future earnings seems like a VERY risky strategy to me.

 

Question

What are your thoughts? Did Facebook overpay, or am I missing a truly genius business decision?