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Comment by tomkarlo | Hacker News Reader

That's a lot of money for an app with relatively little lock-in and a $0.70 (maximum) ARPU.

The lock-in is the network effect, and well, if you're aiming for 1-1.5B users (which can be served with virtually no employment and hosting costs) you're looking at 1B $ yearly profit.

Not sure how you're figuring that. At best - 1.5Bn users locked in - you're at less than $1bn _revenue_ (after you net-out the 30% that goes to Apple or Google for an in-app transaction) and much lower net profits (presumably, it costs some fraction of a dollar in ops, bandwidth and cpu to support a paying user for a year.)

Also, even at $1bn in revenue, this is 16X sales... that's usually the kind of price you'd see for a company that can still grow a lot. When you have 1/12 of the world's population as users, and you're capped at $1 per year per user, there's not a lot of places to grow. Clearly FB valued this based on strategic value to their broader platform.

> and you're capped at $1 per year per user

Why would that be the case? There are always other revenue streams to be explored using the same user base.

Maybe, but they're also entirely speculative. We can only evaluate the price based on the business they have, not imaginary alternate revenue streams.

> We can only evaluate the price based on the business they have, not imaginary alternate revenue streams.

I would really like to agree, but given recent valuations that doesn't seem to be the case does it?

Regardless of how insane deals may seem, you can still only evaluate them based on available facts. If you're going to start speculating about fictional future revenue streams, there's no point to even bothering to contemplate if the price makes sense.

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