Mark Zuckerberg says that paying US$19 billion for WhatsApp was a bargain.
Indeed, according to CNN and other news sources, the Facebook CEO said that the mobile messaging company was “worth more than $19 billion.”
Subscribers to the WhatsApp service can bypass telcos and send text messages to other subscribers for free, using either WiFi or cellular data on their smartphones and tablets.
Like Facebook, Twitter, Tumblr and YouTube, WhatsApp has amassed a huge customer base, about 200 million people. That’s why WhatsApp is valued in a comparable way to Facebook and Twitter themselves.
As a texting company, WhatsApp represents a huge threat to telecommunications carriers who make huge profit on SMS-based text messages, which are essentially free services that consume almost zero bandwidth.
Huge installed base. Customers gain by using its free service. The more people who use the free service, the better that service gets. And it pokes a sharp stick in the eye of telcos. What’s not to like?
Of course, $19 billion is a lot of money. According to Business Insider, this is the second-biggest tech purchase ever, adjusted for inflation, second only to Hewlett-Packard’s purchase of Compaq in 2001 for $25 billion, which would be $33.4 billion in 2014 dollars.
By comparison, Sun Microsystems’ $1 billion acquisition of MySQL in 2008 seems like chump change. Heck, Sun itself was purchased by Oracle for only $5.6 billion in 2009. Pocket money.