Compared to other internet giants, Facebook has been acquiring smaller companies quite actively. In fact, only eBay, Expedia and Amazon can compete with the social network site in terms of numbers. Value-wise, Expedia and Amazon had the upper hand, but the purchase of WhatsApp shifted the balance toward Facebook.
The question is: was it worth it? WhatsApp costed much more than Instagram and the profit is not guaranteed.
Seeing how things stand these days, Instagram has returned far more in value. However, Facebook’s long term plan for WhatsApp is just now coming to fruition.
First of all, Instagram was a much cheaper purchase, at just $1 billion, compared to a net price of around $22 billion for WhatsApp. Instagram has gone from 30 million daily active users at the time of the acquisition to over 500 million today. And there are another 300 million people that use it at least once a month.
Instagram is also contributing about $1 billion per quarter in revenue, and about the same per year in net profit. These numbers will likely continue to climb, with no visible ceiling in sight.
However, this doesn’t account for the value of their new spin off feature, called Instagram Stories which is a clone of Snapchat. It doesn’t account Instagram’s value as a cultural institution either. All in all, we’re just talking about a spectacular return on investment.
In comparison, WhatsApp hasn’t been fully monetized yet. Just as with early Facebook, focus has been on growth. Monthly active users have more than doubled from when the deal closed, and most of them live in emerging countries where Facebook can layer additional needful services on the base platform.
If we take a look at its two largest competitors, Line and WeChat, they earn an average revenue of $7 and $9 per user, respectively. So at those figures, WhatsApp would be bringing in $9-12 billion a year. Now, this isn’t a totally fair comparison, as those platforms serve ads that we’ll never see on WhatsApp. But those apps do something else really well that WhatsApp is very interested in copying: payments.
With those two apps, users have the ability to order food, buy movie tickets or even send rent to their landlords. This means that mobile has definitely taken over the role of cash and credit cards. WeChat Pay alone handled around $2 trillion in transactions in 2016, a number which has likely doubled since then.
In sum, Instagram was a bargain that’s turned a very tidy profit. WhatsApp was a very different sort of bet. If it can become the dominant payment app or ecommerce platform in any of the bigger countries, it’ll be one of the shrewdest acquisitions of the Information Age.
Infographic source: 16best.net