How Much Did Facebook Just Spend On WhatsApp?

Facebook bought WhatsApp for $19 Billion dollars in a cash and stock deal on February 20th. WhatsApp allows users to send  SMS like messages over data networks. They give users (450 Million of them) a free year of the service then they charge $1 per year. There are no ads and they generate almost zero revenue.

Well surely they must have been worth something if Facebook was willing to pay $19 Billion right? After their final round of funding, WhatsApp was valued at $1.5 Billion. Huh? According to Techcrunch, WhatsApp raised $250 Million in their 2009 seed round, $8 Million in 2011, and $52 Million in 2013 to reach their $1.5 Billion valuation.  Sequoia was an early investor and owns 20% of the company which equates to a 50x return on their investment.

Here are some other numbers you may not know:

  • For less money you could adopt every pet in every shelter in the US ($1.2 Billion).
  • The deal is for $4 Billion in cash and $12 Billion in Facebook stock which would vest over the next four years.
  • With 55 employees, WhatsApp is commanding a price equivalent to $344 million an employee, or about $28 a user.
  • Mobile phone operators lost an estimated $23 Billion in sales in 2012 to messaging apps.
  • A full list of things that cost less than Whatsapp is available on this blog.
  • 500,000 Whatsapp users left after the sale was announced.

There are two theories about why Facebook would want Whatsapp. The first is that they want to hedge against other forms of communication just as they did with Instagram. The second is that they are building a suite of products similar to P&G. What are your thoughts?