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Comment by krschultz | Hacker News Reader

The question about WhatsApp is not whether or not it was worth $19B, the question is whether or not it was worth 8% of Facebook. The bulk of that purchase was in FB shares, not cash. It just so happens Facebook is worth $235 billion dollars itself.

I can see an argument where the worlds most used mobile messaging app is worth at least 8% as much as the world's most used social network.

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Maybe they're both overvalued?

I thought that for a while, but the thing is that Facebook's actually pulling in revenue. Internet tells me they have a PE of 60, which is high (20 is normal for a mature company) but not order-of-magnitude insane. If Facebook is overvalued then advertising as a whole is, and that doesn't seem likely in this age of metrics and PPC competition.

During the '00 bubble people said Yahoo's valuation was inflated because all the bubble companies spent their money on Yahoo ads. But for my money Yahoo has turned out to be worth its bubble valuation. Even if most of its value has come from a few clever investments, well, sounds like Facebook's doing the same thing.

A PE of 60 is very high. A very rough rule is that the PEG (PE to Growth, where growth is earnings growth in percent) should be about 1.0.

So a PE of 60 means the market is expecting very approximately 60% year on year growth.

That's probably what facebook is growing revenues, so maybe it's rational. this (a little out dated) chart shows that: https://marketrealist.imgix.net/uploads/2014/05/Companies-Ad...

Probably. But if you put yourself in the shoes of the executive team at Facebook, buying WhatsApp killed off a potential threat , and it was worth 8% of market cap to do that. Everyone talking about how much WhatsApp is worth vs some other company is missing that point.

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