Deadline Big Media 73: The WhatsApp Zuck Podcast

Deadline Big Media ep 73In this week’s podcast, Deadline’s Executive Editor David Lieberman and host David Bloom examine whether Facebook paid too much with its $19 billion purchase of messaging service WhatsApp, ponder whether anyone should pay for the maker of blockbuster mobile game Candy Crush Saga now that it’s filed for an IPO, consider the impact of the FCC’s replacement net-neutrality rules and look at the real motivations behind the clamor for Google Fiber.

The Davids also look at the possible futures of both John Malone and Time Inc. after some very interesting news this week from both.

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Did Facebook Overpay For WhatsApp?

By | Thursday February 20, 2014 @ 7:17am PST

That’s the question investors are struggling to answer this morning as they recover from the shocking news last night that Facebook agreed to pay $16B (or $19B if you include some restricted stock) for WhatsApp. Facebook WhatsAppAnalysts like the broad appeal of the messaging service which uses the Internet, as opposed to phone networks, to easily work with different platforms at a low cost — it can take the place of Apple’s iMessage, Google Hangouts, and Blackberry BBM. An average of 450M people used WhatsApp in December, and the number is growing at a rate of 1M a day. (It’s free for the first year, and costs 99 cents a year after that.) But the service would have to generate $1B a year in cash flow to justify the price tag, and “few data-points to support such an assumption were provided by the company, as evidently few are available,” Pivotal Research Group’s Brian Wieser says. It’s not clear how much cash it can generate: Execs said last night that they won’t sell ads on WhatsApp. As a result, “it is not hard to come up with plausible assumptions that suggest the price is 50% too high…or too low,” says Bernstein Research’s Carlos Kirjner. While he says it was strategically sound for Facebook to take the gamble, the deal also suggests a potentially worrisome degree of self-doubt — that the company didn’t think it could replicate WhatsApp’s success for less than $19B. Others who feel warmer about the acquisition say that other metrics justify the high price. Read More »

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Facebook Agrees To Pay $16B For WhatsApp

By | Wednesday February 19, 2014 @ 2:06pm PST

FacebookFacebook shares are down in after-hours trading after it announced the startling stock and cash deal for the mobile messaging service — the biggest acquisition it has ever made. The companies say that the combo will help them “bring more connectivity and utility to the world by delivering core internet services efficiently and affordably.” Facebook CEO Mark Zuckerberg says WhatsApp “is on a path to connect 1 billion people. The services that reach that milestone are all incredibly valuable.” Facebook plans to keep WhatsApp’s “core messaging product” and Facebook’s Messenger separate for now. “Here’s what will change for you, our users: nothing,” WhatsApp says in a blog post. Facebook also will maintain WhatsApp’s brand and keep its headquarters in Mountain View, CA. Co-founder and CEO Jan Koum will join Facebook’s board. The companies expect the deal to close later this year. If it doesn’t, then Facebook will have to pay a break-up fee of $1B in cash, and give WhatsApp $1B worth of its stock. The $16B price suggests that What’sApp is just $1.5B less valuable than Sony, based on its market cap, and more than twice as valuable as Gannett or Pandora. The purchase price consists of $4B in cash and $12B in Facebook shares. In addition, Facebook has agreed to give $3B in restricted stock units to WhatsApp’s founders and employees. They will vest over four years after the deal closes. This is believed to be the biggest deal yet for a start-up backed by a venture capital firm, Sequoia Capital. It says on a blog post that “WhatsApp has tapped into our insatiable appetite for personal communication. It is part of a chain that over the past 150 years reaches from the Pony Express, Telegraph and airmail letter to the telephone and email.” The messaging firm has just 32 engineers, and has an uptime of more than 99.9% “so users can rely on WhatsApp the way they depend on a dial-tone.”

Here’s the release: Read More »

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