I don’t mean “Facebook is Microsoft” in the good sense. I don’t mean Microsoft of 90’s – the all dominating software giant. I mean Microsoft of last decade, unable to compete in the world of cloud computing, search engine and smart phone.
To counter this, Microsoft invested huge sums of money in companies like Skype( 8.5 billion), aQuantive ( 6.5 billion) and Yammer( 1.2 billion). All these companies were supposed to provide Microsoft with added technology to keep them competitive in the non-desktop market. However, after these acquisitions also, Microsoft continues to struggle in these markets. They recently wrote down the entire acquisition amount of aQuantive in their financial statements. They seem to have managed to get some value out of Skype though whether it was worth 8.5 billion is still open( For comparison – They paid 7.2 billion for Nokia mobile unit).
Facebook recently purchased a Chat application called WhatsApp by paying a hefty 19 billion dollars. I am purposely calling WhatsApp as a chat application and not a “social networking app” because I believe that these new apps are nothing but a glorified chat apps and does not represent the future of social networking. See my Chat Bubble post for my thoughts.
However, Facebook is fearing the loss of dominance in the social media domain and is desperately trying to buy up mobile based social media companies to keep up. They had offered to buy SnapChat for 3 billion and now have successfully purchased WhatsApp for 19 billion. WhatsApp has 450 million users. That is 44$ per user!!
How does Facebook plan to make up that kind of money? WhatsApp does not lend itself to advertisements the way Facebook does. They had gone with subscription model which would charge 1$ per year. If they continue with the model, Facebook can hope to recover cost in 44 years if all the current user pay. That is a completely absurd valuation for a chat application.
I am now going to wear my great prediction hat and say Facebook will admit that WhatsApp acquisition was a waste of money in 3-5 years. What are your thoughts? Any ideas on how Facebook is going to make use of WhatsApp? Do Comment.