If yesterday’s announcement of Facebook paying $19 billion in cash and stock for WhatsApp surprised you then maybe you’d forgotten this prediction I published on January 8th:
#6 — Facebook transforms itself (or tries to) with a huge acquisition. I wrote long ago that we’d never see Facebook in the Dow 30 Industrials. The company is awash in users and profits but they’ve lost the pulse of the market if they ever had it. Trying to buy their way into the Millennial melting data market Facebook offered $3 billion for Snapchat, which turned them down then rejected a $4 billion offer from Google. Google actually calculates these things, Facebook does not, so where Google will now reverse-engineer Snapchat, Facebook will panic and go back with the BIG checkbook — $10+ billion. If not Snapchat then some other overnight success. Facebook needs to borrow a cup of sugar somewhere.
Now $19 billion may still seem like too much money but remember the alternative for Facebook is oblivion. Facebook stock is overpriced, making the acquisition cheaper for the company than it looks. On a per-user basis it’s still substantially below Facebook’s own numbers. And part of the reason for that big number is simply to have it be a big number — big enough to make the point to Wall Street that Facebook is determined to buy its way in front of the wave.
The only limit on what they would have paid for WhatsApp, in fact, was that they had to leave something for the next big acquisition, because this is not the end. Look for another $5+ billion acquisition soon for Facebook (maybe higher if they can use all or mostly stock).
This is what happens, you see, when the mojo goes, leaving only money behind. You spend it trying to appear youthful again.
Yep… When I saw the news I immediately thought of your prediction.
That’s why I come here. Once again, you called it!
meet the new internet bubble, same as the old internet bubble.
You’re not wrong there, but these numbers are stupefying. I guess Brian Acton and Jan Koum are looking back on a pretty handy five years’ work.
How many Facebook and WhatsApp users are actually “bots” ? Pump and dump!
IMHO, important part of buying WhatsApp to Facebook is WhatsApp’s ~1B user social map. Does Facebook not lead the world in leveraging social maps? The first change they’ll make to the product is adding login via a Facebook account. They’ll otherwise let it go its own way, but in the meantime they’ll be harvesting all the social connections in the backend. Facebook said that WhatsApp’s product roadmap will remain unchanged. They didn’t say anything about changes to Facebook. No doubt Facebook will soon be showing friend suggestions based on data from your list of WhatsApp connections, as well as offering advertisers even better targeting for their Facebook ads based on analysis of that data.
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If Facebook is going to “transform” itself, it’s not about making huge changes to Facebook’s main cash cow social network. It’s about extending its reach and tying the data together in the backend.
“Does Facebook not lead the world in leveraging social maps?”
Good question, do they? The times I visit FaceBook on a Browser without FB Purity installed, the ads a very low-rent affairs of no relevance to me. What are they doing with their much touted social graph?
Right, I hadn’t noticed that but only the first ad is targeted at me, after that they are for stuff my friends “Liked” (if)
“Does Facebook not lead the world in leveraging social maps?”
Good question, do they? The times I visit FaceBook on a Browser without FB Purity installed, the ads a very low-rent affairs of no relevance to me. What are they doing with their much touted social graph?
What is facebook?
Having college aged kids I’ve spent some time on college campuses over the last several years. It is interesting to sit in a student center; and listen to and observe the kids. You can quickly see why kids gravitated to Facebook many years ago and why they are less interested in it today. You can see why tools like SnapChat and WhatsApp are popular today. If you’ve watch college kids over 10 years you’d know why instant messaging and email have also fallen out of favor. The reasons are pretty obvious and very simple. It really comes down to privacy.
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Kids don’t worry about privacy. They react when they think their privacy is being compromised. They love communicating with each other, sharing their thoughts and experiences. If you’d spend an hour on a college campus you’d hear discussions and debates on almost everything. Kids love expressing their ideas and college is a safe place to do it. They lost their feeling of safety with instant messaging, email, and they are concerned about Facebook.
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I agree “…they’ve [Facebook] lost the pulse of the market if they ever had it. ”
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Facebook does not understand why they became a success and why they are not hurting their business. You will not find the Facebook application on my phone. I got tired of it draining my battery. When I found out it was Facebook causing my battery problems and what it was doing, it alarmed me. I removed the application. My trust in Facebook was lost.
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In a way Facebook reminds me of IBM. They are trying to buy their future success, ignoring the fact they are antagonizing their customers. The very same customers they hope will buy and use those future products and services.
Only time will tell if the WhatsApp purchase will make financial sense, but they have at least secured one thing: they kept Google or Apple or Yahoo from buying it themselves and becoming a serious threat to FaceBook.
Perhaps their next acquisition is IBM.
IMHO. They are not going to survive on just the “social” part. I can already see that people are not sharing as much.. Maybe they’re afraid of being tracked by corps and the government? FB is going to have to add some kind of intrinsic value to their offering such as integrated shopping with Amazon or “mashable” mapping services with Google without the feel of having to “add on” things. They have to have a “one stop shop” experience that is professional looking and easy to share with other folks. Google does this with Google+ and does a much better job at it.. Facebook was just lucky to catch folks at a time when it was “cool” to go online and find friends but that time is fast coming to a close if not gone already. In the end I think advertisers will find they are not getting their money’s worth from FB marketing and they will pull out very quickly and abruptly. I can see a “Zynga” scenario coming up in the near future
Totally spot on with your prediction and something I did not think would happen (I even said that in my comment on your 2014 predictions and was obviously wrong).
I thought Facebook would buy lots of small shops to grow and perhaps if they spent big, would go for something tangible (physical) instead of software.
Maybe from interviewing all those big shots over the years you have a better insight into their psychology. Kudos and congrats on brilliant foresight.
“This is what happens, you see, when the mojo goes, leaving only money behind.”
Here I sit,
a sad, little sod.
My mojo has left me.
So has my wad.
Facebook is also buying itself into the news. I use Google News everyday and over the last few months there was no substantial news on Facebook. Even Yahoo was more visible in the tech press. Recently there was a study that said facebook was losing users and that brought along with it some considerable chatter. Now this acquisition. I think there is a parallel with amazon also where both companies(while viewed in the valley as tech companies) are hardly in the mainstream news for tech reasons(Hence the Bezos punt about a clearly unrealistic plan for drone deliveries). Both Facebook and Amazon need to be in the news and need to in the tech news as well.
I have never been comfortable with most forms of social media. I guess I value my privacy too much or something. I’ve got a facebook account, but I probably look at it less then once a month. On top of that, it seems like every time I go there the presentation has changed. The whole experience is not intuitive or comfortable to me. I am working on my social media phobia by building sites on wordpress. But overall I’m a social media trogledyte.
I do use WhatsApp, but purely for texting internationally. What I’ve learned since Facebook has bought WhatsApp is (1) they don’t record anything – they aren’t keeping a record of my communications, as a privacy hound I like that; (2) They have 500 million users, and they charge $1 a year for use.
So, unlike facebook they provide a valuable service with a direct revenue stream tied to that service. It seems reasonable to believe that the number of users and the fee could each double in a short period of time. That’s $2 billion in revenue against very little cost.
At $19 billion, buying $2 billion in revenue is not bad, because its mostly pure profit. Of course we don’t know if people will use WhatsApp for the next 12 years, but still its better than a lot of purchases that firms make.
The problem is, there are plenty of others providing WhatsApp kind of functionality out there. If I am a founder of WhatsApp, I’m taking the money and cashing out of the game, because the whole app industry thing looks bubblish to me. You’ve got products that are easy for other to create, whose use is somewhat faddish, that often don’t provide really good (meaning necessary) value. WhatsApp provides a valuable service in facilitating comminications, but that’s easy to replicate, though it does benefit from its network externalities (then again, so did the telegraph).
“WhatsApp is the first of several big acquisitions for Facebook”
I take it you do not consider the $1b FB paid for Instagram to fit in this category?
Facebook’s financial model may be working for now, but the truth about its true effectiveness as a platform is starting to become apparent to a number of advertisers who question not only the CPM and the eCPA of the platform generally but also the level of fraud that exists upon it with no independent method third party auditing: FB does not use IAB, Media Ratings Council or Ernst & Young to verify its numbers, and more and more stories of click farm fraud schemes are coming to fore. Bottom line is that it’s becoming clear to a number of companies that FB doesn’t make sense for them. Granted, for some, it does, but the number of companies for whom it does not is definitely growing.
That seems to say that the halycon days of Facebook may be coming to an end sooner rather than later. They must surely realize this internally, as it seems clear that they are in a desperate race to reinvent themselves before they become the next MySpace. Their inertia and trajectory certainly seems to have them pointed in that direction, and eventually “the next big thing” will come along and finish the job.
Good call on the acquisition, and interesting that you mention Google reverse engineering SnapChat. Seems to me that SnapChat is the antithesis of Google’s profit model (data acquisition); though they could host everything (as long as they host CA they’d have access to that precious data, SSL or not), drown their intentions in a 10,000 word ToS that says they own all the data on the service, and then just replicate the look and feel. Most wouldn’t know the difference.
But the actual selling point of SnapChat for most of it’s users is something I think Google has little interest in, other than for hedging their bets. Like Microsoft’s entrance to the cloud market, it would be more of a concession than a genuine interest.
And I guess a reasonable follow up would be “well then why did they try to buy them?”
Same reason they bought a company like DoubleClick. More of a market they want to control. Not because they want the app itself.
Google and Facebook are competitors only in the broadest sense. Google has the development chops to reverse-engineer SnapChat, but not the social media mojo to give it a ‘heart’ a la the Tin Man. Google is a lot of things, but social media continues to elude it.
The biggest issue that people don’t consider is the stuff that you post on Facebook will always be the property of Facebook. And in years to come, there will be many new data mining algorithms that will examine your data, and arrive at various conclusions. These conclusions can be used to make all kinds of decisions, from political, tax collection, benefit allocation, mortgage eligability, etc. When you make posts, likes, etc on Facebook you are unknowingly creating an in-depth phsycological profile of yourself. Probably not something you really want as you go forward into the future.
Good call, Mr. Cringely! Facebook was, is, and has always been mostly about hype – created in the service of its investors, underwriters, and founders. From the very beginning, the Facebook brand was tarnished by the moral lack exhibited by its Founder, who insisted that his word was only a “temporary thing”.
That said, the public bit big into this one because the marketing hype was so well served up, and the tech sector investors – mostly feckless VC’s – were desperate for another big winner to start Bubble No. 2. So, we are now in the midst of that.
The fact is that Facebook and other social sites have clearly shown that the only barrier to entry in the social field is cash and a new wrinkle. That means anyone with the means can play; it also means that longevity over more than 10-20 years is a thing of the past.
Facebook will continue to make money for its investors and Founders, and a few lucky souls who dip in and out of it’s daily street value with good timing. That said, it’s all downhill for Facebook from here -probably a slow roll, but it’s direction is imminent. Again, good call!
I don’t necessarily disagree with Bob’s conclusion, but since Facebook has a lot of money it’s always possible they will put it to good use and cause it to grow, increasing shareholder value and the stock price. What I don’t understand is the comment about marketing hype. I don’t recall ever getting a piece of junk mail from FB or ever seeing or hearing an ad for FB on TV or the radio. The exact opposite of a company like Apple. All FB hype has been word-of-mouth.
Facebook could have spent a fraction of that price developing it themselves. Heck, for half of what Facebook paid, the pope would drop what he’s doing.
By buying it they avoid lawsuits for their “copy” of the service, don’t have to worry about whether theirs will be popular enough, or whether current users will switch over to it.
You first have to look at “what’s the product”? What does Facebook actually SELL? The answer – Human Interaction. That’s it – FB is all about connections – just like LinkedIn, Twitter, Pinterest, etc. The value is simply that. As far as the WhatsApp acquisition, is actually DOES makes sense. Social media is here to stay. As far as involvement, it’s up to the user. Nobody says you have to participate – but the BIG question is DO YOU WANT TO? And what’s the value—– that’s the issue.
[…] $19 Billion for a Text Messaging Service. This is what Facebook just paid for WhatsApp, ( a little perspective: the WSJ pointed out the company only has 55 employees. With 26,000 employees, agribusiness giant Conagra has a market cap of only $12.7 Billion ) Technology watcher Robert X. Cringely predicted earlier this year that Facebook might do something like this. Find out why Facebook may be acting more from desperation than strength in this half page blog entry… […]
facebook only bought whatsapp in order to kill it, isnt that obvious people?? lol, so they dont have to worry for a while, in time theres another big thing gaining popoularity, facebook will always try to buy it, as long as it has enough money and be the “rich” company it is now, sure thing is teenagers are finding new ways to comunicate, leaving the old apps behind, i can see the day when there comes a BIG new social app or website in the near future, and being facebook out of trend, they will not have enough money to buy it at that time, lets say 5 or 8 years?? at most, who knows but its gona happen, i can see mark whinig at his bedtime lol
not a big fan of facebook, its actually becoming boring and odd, but i agree its still “the” trend right now
whatsapp was just a call, of what may happen in future, i mean, its 2014, its not like we are already having amazing tech to make amazing cyber places, whatsapp lost because facebook is still “the” thing, but lets wait a bit less than a decade, i bet u guys it will be a whole new different era, where facebook will just have no place on it, like a small mouse in the middle of the street lol XDDD face it mark, nothing lasts forever, if u want an advice, try to make facebook cool, isntead of buying companies, thats the most stupid thing u only waste money like wtf!!! facebook is just the same it was in 2005 just different looks, if u wana improve it, find new ways to do so, think beyond, think future, not retrograde lol
thjats my advice
Matthew Hennessey is an associate editor of City Journal. AND has censured my comments on his journalistic, economic and political thoughts. So let other WEB sites blossom with his ignorance.
read : https://www.city-journal.org/2013/bc1213mh.html
MY COMMENT: Australia’s premier newspaper “The Oz” had as its first political cartoon “Pogo” – I’ve loved it since then. Its primary statement should be the motto of every politician and commander “We have meet the enemy and it is us”. Pogo’s depiction of the Oz character for the 1956 Olympics has never repeat NEVER been bettered. That gets rid of some third rate cartoon.
Now some criticism of the author of the City Journal’s piece. This man must be born on April 1 22531 AD no mistake 22531AD because I want him to be born yesterday for at least twenty thousand years.
First Republican Nixon was a criminal – he implicated himself. How criminal do you want a man to be? That the USA republic has two laws – one for presidents and one for others is your matter. The outcome you take lets the world judge USA.
Second Republican Reagan was a criminal – Iran-Contra. That the USA republic has ………
Third Republican Bush41 was a criminal – Stole a Canadian spy computer program and sold it as Made in USA. That the USA republic has ………
Fourth Democrat Clinton was cleanish in Whitewater yet the Republicans pursued him over his personal morals – Shows USA birth morality – Puritanism. And wanted to impeach him over sex. What fcukwits! See how the frogs run their president’s sexual morality this was 1990s not 1690s.
Fifth Bush43 is a criminal because he fcuked USA and the downfall will attribute to him for reducing taxes of the rich yet starting a war that made the Mafia look honest; foreigners paid with pallet loads of money. It was sent to Muslims as protection money there is a law against that somewhere in USA statutes, I think its called bribery! I’ve seen poorly paid US Army officers pay $30,000 per month to stop fighting.
The crap in your essay is innuendo and scuttlebutt. So authors are now allowed to use them to pursue a point. How the fifth estate has fallen! Political correctness or is that a brave new world of USA now.
Katrina’s primary cause was Bush43’s deployment of National Guard’s men and equipment overseas that loss exacerbated the initial problems and forced equipment to come from other states. The National Guard’s equipment has still six odd years later no come to full compliment to protect the USA citizen from the forth coming Global Warming Catastrophe – die deniers.
Two of my favorite images of Bush43 is at the School 9/11 and on the ship for Mission Accomplished. A simple white lie would have got him going sooner. And a National Service avoider acting like Chaplin’s General. Both show lack of initiative and command not a good sign for where Truman’s buck stops. And the whole Bush43 administration let other lower in the ranks take the blame. A sure sign of debase morality and character.
To lead you need to know good advice from bad — USA only gives bad advice because its partisan.
His business rescue will be the end of USA – see Zimbabwe and Germany late 1920’s for a view of your future.
And my first blog stands as the correct action for USA to have followed. I have seen USA. God’s land taken by fools! Give it back to Red Indians – they respect their home!
Column is about WhatsApp, not What’s Up.
Go away, Bazz – you won’t get sympathy for your cause by spamming it onto unlinked sites.
It is just simple! Like humans (that they wanted to be) technology to is growing and is faster and the older it gets the more human it is becoming. I hope humans can still find way to still be human.
I think Bob gets a free “see-I-told-you-so” after the Oculus announcement today.
Bob you made a great prediction!