$16B ($1B) for a hardly profitable mobile app (video sharing site) seems stupid. $16B ($1B) for the future of telecoms (TV) world wide seems a bargain.
Yahoo paid Mark Cuban and his partner $11,000 a user for broadcast.com - that is a bubble price.
The similarities are of course that they're both defensive aquisitions - the money is justified not on its earnings potential but that it could be the start of a new social network that ousts Facebook. If that really is the case, $16B is well worth it. Facebook's aquisition strategy at the moment appears to be 'overpay for anything that could be the next Facebook to their MySpace'. It'll probably work, too - at least for the near future.
But that said Whatsapp is not very popular in Australia so I have a skewed perspective (current marketshare here seems to be roughly a 50/50 split between legacy SMS and Facebook mesenger).
Whatsapp has 450 million users. The issue is that most Americans (and Australians, in your case) have never heard of it, so they assume that it's not very popular.
http://www.wired.com/wiredenterprise/2014/02/whatsapp-rules-...
In Australia it just, for some reason, never caught on - many people I know have accounts (as many as say, Instagram, for comparison) - it just seems to be something people try but don't stick with. Which in a sense, is a pity, as it's demonstrably better than SMS.
But in Australia Facebook Messenger already has the equivalent marketshare. Perhaps between Facebook Messenger and WhatsApp, Facebook would end with a majority marketshare [of IP-based messaging] as one app is popular where the other isn't. I honestly wouldn't know.
http://pixel.nymag.com/imgs/daily/intelligencer/2014/02/19/1...
90% market penetration in Germany, Italy, Spain, and seemingly all of Latin America makes it more than just one popular app among many.
In the US I've tended to go with an MVNO like H2O on the back of AT&T. In Australia Optus on a pay as you go. Both are choices from a limited range when compared to the UK.
You can walk past even a 3 store in the UK and see things like a monthly £5 deal with variants that increase data allowance at the expense of SMS. ( forgetting for the moment MMS which simply value adds the later proposition ). It makes sense to spend as little as possible, especially given the austere conditions, to obtain the highest data allowance with adequate voice minutes and to use WhatsApp as a replacement for SMS, which rationally appears as a tax on data allowance, given the expectation of free texting. ( And now add MMS ).
Include the street stalls selling sims for £5 to £10 with a greater focus on expat segments of the population, with data included and so a bundled international SMS substitute. Add mix and match packs from Dolphin and so on.
It's highly competitive. Use wifi when available, back up is the carriers, and get as much data and use that up.
SMS was a surprise cash cow for telcos. WhatsApp played that massive user base well I have to say. The US and AUS I think lacked the competitive market to notice it as much.
/shrugs
Who knows. Continually predict a bubble, and everyone forgets that you were wrong for over a decade when it finally happens...
They might still be 'losing money', but 3.6 billion/yr is plenty of money coming in.
The market sees it like this: Their costs are high because they (Google/Youtube) are investing to support high growth. At some point the growth will taper off, and so will the investment (because you invest to support larger numbers in the future), but the money keeps rolling in.
Google has deep enough pockets to invest in that for a long, long time.
Google also gets a whole pile of AV to do speech-to-text and other analysis on (before any additional compression) that no other firm gets a chance to do.