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Business Management

WhatsApp with Your Value as a User?

When Facebook agreed to buy WhatsApp for about $19bn back in February, the price was seen as a new front in the battle for internet supremacy. The valuation shocked even poker-faced VC veterans of Sand Hill Road who could probably build their mansions from gold bullion and make windows out of diamonds, such are the victories they have scored in the web age.

When the news broke I was interviewing the alpha-male CEO of a fast-growing B2B startup who had (and still has) hopes of a $1bn valuation based on a $100m revenue stream if and when his company makes its market debut. “It kind of makes me feel a little inadequate to tell you the truth,” he said.  There was a smile there but it didn’t spread far and it fell somewhere between the Oakland Bridge span from Wry to Bitter.

One justification for the deal was the extraordinary number of subscribers WhatsApp had at the time. Monetise that base, globalise further and you have a huge and potentially lucrative audience – or so went the logic.

This begs the question of what a subscriber today is worth, armed with the new knowledge that the final value of the deal, because Facebook stock has risen, is up to $21.8bn. When Facebook announced the WhatsApp deal in February, the latter had 450 million signed-up users. Based on the $19bn valuation this valued each user at about $40. In April, WhatsApp said the base was up to 500 million subs and in August said the total had swelled to 600 million. Based on the recent rate of growth, it can reasonably be expected that that has grown to perhaps 650 million users.

So the value of a WhatsApp user? About $33.50. There is historical precedent for such services being valued at about $40 per user, so, the odd question arises again: did Facebook get a sweet deal when it paid a huge sum for a five-year-old company with little in the way of revenues?

 

Martin Veitch is Editorial Director at IDG Connect

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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