Really worth $19 billion?

Blog Author: Aaron Smith | March 12th, 2014

 

Facebook has paid $19 billion dollars for Whatsapp. This is a lot to pay for an mobile device application that simply allows users to connect and share messages. It is also a hell of money when you consider that the annual budget of NASA is a mere $17 billion.

So why does Facebook want Whatsapp? Basically, they are looking to acquire the user base and the connections that go along with that. Facebook is looking to target how users interact with each other and use that to serve up targeted advertising.

Many are asking whether that is really worth $19 billion but Facebook certainly seems to think so. Many point to Microsoft’s acquisition of Skype as another example of a large business acquiring a large customer base. Whatsapp acknowledged a while back that they had turned down an offer from Google for around $3 billion.

What the purchase does illustrate is the desire for large companies to acquire more information about users habits in an effort to deliver targeted advertising and in turn generate revenue. There seems to be little escape from the fact of increased advertising as you surf the Internet.

However, on the other side it is important to appreciate how much you are receiving for free. Look at products like Google Maps, iTunes, Outlook.com and the like all of which are free for users. it costs money to provide these services and the easiest way to recoup these costs is via advertising. Most people would agree that what they want is targeted advertising that is relevant to their needs not some random advertisement. So the news there is not all bad.

The price that Facebook paid is what made most gasp, however Facebook believes that Whatsapp is in fact worth much more than they price they paid. Time will tell on that score.

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