By now, everyone has heard about the incredible Facebook (FB - Analyst Report) purchase of the texting platform WhatsApp for $16 billion... or $19B. What's a few billion in bubble land, right?
The opinions on and recalibrations of FB value and business strategy will be flying fast and furious today. I don't really care that much about the valuation of FB shares.
I'm more interested in what this move says about the fast-moving landscape of social media, mobile tech, and where the money will be made -- or lost -- in this space going forward.
To give you some food for thought before you opine on the kind of acquisition that makes one think of "tech bubble tops," let's hear some early thoughts from some of the analysts.
Yes, there were a handful of downgrades. But market reaction in FB shares seems tame. I want to focus on what the buy means strategically. As CRT puts it,"this could be an acquisition of epic proportions or an acquisition of epic failure -- it's just too early to tell."
Oppenheimer analysts note that WhatsApp has 450 million monthly users and that 70% of them are active daily. This suggests FB paid $42 per user. While the deal is 8% dilutive to earnings, $42 per user is well below its peers.
Key strategic take-away: WhatsApp is likely to pursue a subscription model versus the advertising model of its peers.
Stifel Nicolaus analysts believe FB shares would have been pressured by more than single-digit percentages if Google had purchased WhatsApp instead.
Key strategic take-away: Facebook has with the acquisition of Instagram and WhatsApp muted the strategic risk of Google acquiring its way into social media and communications in a real way.
Pacific Crest analysts note that mobile messaging services are competitive to other social networks and Facebook's acquisition of WhatsApp for $19 billion shows that it likely agrees.
Key strategic take-away: Doing these acquisitions is the third-best option. PacCrest would rather see FB be successful organically or acquire competitors earlier (and cheaper).
I'm sure we'll be hearing more opinions on this deal, and analyst actions on ratings, estimates, and price targets into next week.
In my own contribution to the research, I've been a WhatsApp user for years and found the mobile messaging platform superior in reliability and speed to that of Yahoo's (YHOO - Analyst Report) Messenger. And I had also found FB's mobile messenger clunky. Clearly they bought WhatsApp to instantly capture a big pool of loyal, global users.
What's your take? Are there are other strategic take-aways here about what FB sees in the future of social media and mobile tech?
Or did they just "have to" do this deal to stay relevant when Big Brother -- er, I mean Google -- can dabble in just about any industry it wants to?