WhatsApp Lost $138M Last Year | Hacker News Reader

WhatsApp Lost $138M Last Year

dealbook.nytimes.com

I think FB cares more about ruling the world than WhatsApp's P&L statement. From "Mobile is Eating The World" [1]:

Global SMS: 7.5tr messages a year

WhatsApp: 7.2tr messages a year (with just 30 engineers)

[1] https://news.ycombinator.com/item?id=8524256

Of course we should note that WhatsApp (and Facebook!) is piggy-backing on the work of the many thousands of telecom engineers who have over the years built and maintained the infrastructure that both Facebook and WhatsApp require to survive.

And we are all piggy-backing on whoever invented the wheel.

You mean the one we pay for each month in our mobile bill?

$206.5 million of that loss was for share-based compensation expenses and issuance of common stock below fair value -TC

This is a poor headline.

Sorry I see the 98.5 for the year end 2013 but I don't see how your getting to 206.5 from there? Their total costs are only 148m on the statement of operations. Also presumably some of that stock based compensation is in lieu of paying cash. I'm not sure its fair to discount it entirely.

edit: I sleuthed out what TC means. Tech Crunch are referencing first half of 2014 this article is year end 2013.

"Research and development at the start-up, which employed just 55 people at the time it was sold, totaled $77 million"

I'm super-confused by this, can anyone explain what sorts of expenses would be this high and labeled as R&D costs for a company like WhatsApp?

Probably taxes. There are non-trivial tax credits for R&D spending. My guess is they shoehorned as much of their costs into R&D as they could. You can see they got 1.2 million in R&D credits in 2013 in the referenced document.

Right. It's SOP for tech companies to list basically all of engineering as R&D for tax purposes.

From what we've seen Facebook acquisitions move over to the Facebook infrastructure.

That could mean bringing in expensive consultants to assist.

I think the Whatsapp price was a huge blunder by Zuck. Whatsapp has lots of users - most of whom are in countries viewed as almost worthless by advertisers. Their US footprint is insignificant, and shows no signs of growing here or in many other valuable countries. Their current revenue - $10.2M/year with 400M users - shows their users' propensity to pay.

Even if you valued Whatsapp by Facebook's P/E ratio of 87.74, it would have to make ~$215M/year in net profit to justify the (original) $19 billion price tag. That's around $0.50/user/year in net profits. I just don't see it ever happening.

Whatsapp has completely won in many foreign markets.

I don't have a Facebook, but network effects forced me to use whatsapp. Literally every woman I've attempted to communicate with over the past year uses whatsapp exclusively. They may be from Africa, central Europe, India, Vietnam, its all the same - whatsapp.

Personally I hate it - it's terrible compared to google hangouts and doesn't even have a web client. But if I don't use it, no women.

Maybe you want to write off the rest of the world, but zuck isn't.

Out of curiosity, why are you communicating with women from Africa, central Europe, India, and Vietnam?

Wikipedia has a good explanation: http://en.wikipedia.org/wiki/Dating

More seriously, I'm a foreigner and I live in a college town so I get many opportunities to meet foreigners. Indians also tend to view me more as a source of novelty sex rather than as a real relationship [1]. US/Africa culture gaps are also a LOT smaller than US/India or Africa/India culture gaps which sometimes makes things easier.

[1] I'm not moralizing or criticizing nor am I particularly averse. One night stands are great. I'm merely at a place where companionship is as important to me as sex.

[edit: I should clarify that I'm an American, I currently live in India, and "foreigner" = "not Indian".]

> Literally every woman I've attempted to communicate with over the past year uses whatsapp exclusively. They may be from Africa, central Europe, India, Vietnam, its all the same - whatsapp.

Just for reference, in China it's wechat, and whatsapp is unknown.

Likewise in europe it's Kik and Viber.

At least in Holland and Germany I think it's also predominantly WhatsApp, though.

> Whatsapp has lots of users - most of whom are in countries viewed as almost worthless by advertisers. Really? I have run campaigns in almost every country on this rock. All people are valuable in some way. Sure a wealthy country citizen is worth more but you'd be surprised how much companies will still pay and compete to reach that villager in Thailand on their mobile phone.

I agree that $19b was excessive for this company, but if they can maintain/grow market share then it wont be that bad. But given the way technology changes I think they should have discounted their offer to offset the risk another service gains popularity. Unless FB do something to lock in distribution like create their own mobile OS, this will remain a big risk.

It's myopic to think that anything/everything they do is advertiser driven. If you think of Facebook's goal as to "connect the world," and with such a large user base on WhatsApp, you can imagine that all WA needed to do was add a profile feature, and BAM - legitimate Facebook contender.

It's why I think FB is nervous now that Twitter's profiles look a tad like FB timelines...the boundary is now a bit blurred.

Facebook is a public company now, their goal is to generate value for their shareholders. All other goals like 'connect the world' are secondary.

Oh come on - it's not like we think Google abandoned their "do no evil" mantra or their mission to organize the world's information simply because they went public...or Apple stopped designing great products and revolting against mainstay ways we view our relationships with technology. Granted, there may be additional considerations, but I doubt any person who has worked there would say that optimizing shareholder value is #1 priority

(though I do believe the former was abandoned for other reasons, but that's a separate discussion...)

It's popular in emerging markets. Maybe it won't be worthless in 10 years. I still don't get the price. WhatsApp doesn't have the market cornered. There are 2-3 competitors and most locals I've met use all of them.

> most of whom are in countries viewed as almost worthless by advertisers

Facebook is presumably making the bet that eventually those countries will no longer be deemed worthless by advertisers.

I don't know whether to be happy or sad about that fact that my country is "worthless" according to advertisers.

A lot of people are missing the point, citing the income WhatsApp has to make for Facebook to make back the money.

What they forget is that WhatsApp was able to serve almost half a billion users with "minimal" hardware. That's what Facebook wants, Facebook will save a lot of money if they can be as efficient as WhatsApp in terms of hardware savings, engineer ratio user ratio. I would imagine that's Mark is aiming for.

Facebook was removing a potential competitor from the market, just like they did with Instagram.

They bought a massive customer base in developing countries, and they manage to secure all of those users who use a messaging app without probably doing any deals with any telcos.

Not only that, they gained a potential advantage in the payments space. Potentially turning their users into being able to make payments within the facebook & partners networks.

Look at what is happening in China with companies turning their chat apps into taxi booking apps like WeChat.

WhatsApp is/was an XMPP client in disguise. Facebook sits on top of different data at a different scale with a different problem definition.

So that's less than 1% of their worth ($19B sale). Does that seem like such a huge number now?

"worth"

I think in 5 years 19B will look cheap to own messaging in a substantial portion of the world.

Yes, it does because it's a number of net loss. Nobody buys a business to lose money.

If they're investing in research & development - they're likely not looking at is as a loss - rather a business expense.

You mean 10%

138 million is 10 percent of 1.3 billion.

Did anyone else stop using WhatsApp after acquisition due to Facebook's privacy policies?

Did they actually change the terms?

And would they in this day and age?

I tried, and I only use it for 1 specific group conversation, but it's a group with about 40 people in it and only a small minority were willing to switch [to Telegram], due to their own network effects. :(

I really wish more of my friends were willing to use Telegram. It's really one of the best messaging apps that I've used.

I did and moved to Telegram.

It's hard to believe that app that is free for a year and than 99 cents per year could be losing money. /sarc

It's not exactly shunting vast amounts of data, I'd think a buck per year per user would be pretty good for text messaging.

Given that it's unlikely users will jump ship if they are happy with it over $1/year and the fact that they have 400 million users I think there's a pretty good chance that revenue number will come up.

...but there are so many options to send text messages for free. Why pay the $1 / year?

Privacy and no ads. The "free" alternatives are not "free".

Telegram is "free". I'm not sure why "free" needs to be in quotes. I don't know how I feel about Privacy being touted as a benefit of using anything owned by Facebook.

Have you tried textsecure?

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