3/7/2014

450 million users is the magic number of WhatsApp valuation - The Economic Times
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Access denied
Client = 192.168.1.8 address URL = http://ad.doubleclick.net/N7176/adi/Economictimes/ET_News_300x250_Spl_Spot2_AS;sz AswathDamodaran If this is wrong, contact your system Acoupleofweeksago,Facebook announcedthatitwasacquiringWhatsApp
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for$19billion(Rs1.2lakhcrore).That soundedlikeanastoundinglyhighpriceto payforacompanywith55employeesand

WhatFacebookcouldntachievewithitsownmessagingapp, thesocialnetworkingsitewillprobablygetviaWhatsApp:instant presenceonpeopleshandphones.

SPOTLIGHT
AmazingCars:WorthDreamingAbout

verylittlerevenueinthemostrecenttime period.WhileWhatsApp'smessaging AutoIndustry:Leadership&Strategy TechInvestment servicehasalmost450millionusers, ETSPECIAL: growingsignificantlybytheday,the businessmodelforWhatsApp,which

India'sECommSector:Robust

Saveprecioustimetrackingyour investments

emphasisesthatitacceptsnoadvertising andchargesusers$1/year(afteraninitialyearoffreeservice)seemsincapableof deliveringtheearningsthatyouwouldneedtosustainthepricepaidbyFacebook.

4stunningsupercarsyoucan't miss!
Dreamingiswhatmostofuswholackthe cashtobuyasupercarcanstillaffordto do.Sowhenanautoshowofferssome stunningexamples,it'stimetoindulge. APReview:Lamborghini'sHuracan sleekthroughout CarmakersbankonsmallSUVsasnext bigthing

So,whatwasMarkZuckerbergthinkingwhenhemadethisoffer?Idon'tclaimtobea mindreader,butIdonotbelievethatconventionalvaluationmetrics(suchasrevenue, earningsandcashflows)werebehindhisoffer.Instead,hewasplayingthepricinggame, TataMotors&ChinasCheryin SiliconValleyinvestorslook AAPshirts,Modimugs,c whereyouidentifythemetricthatmarketsseemtobebasingstockpricingon,andyou talksforpossibletieups towardsIndiaforthenextbig areabighit,eretailersc delivermoreofthatmetric.

Tieupsmayincludesharingofvehicle Welaunchedourpoliticalmercha idea platforms,gettingaccesstothemarketin Encouragedbytherecentburgeoningof monthsagoandarealreadyseein Ratherthanbemysterious,let'stakealookatthepricingofsocialmediacompanies, ChinaforTataMotorsandevenhelping India'secommercesector,manyValley dailyorderscomingfromthiscate CherytoenterIndia. investorsarenowlookingatBangalore, saysIITianBaghla,founderofBlu whichincludesadbasedcompanieslikeFacebookandTwitter,subscriptionbased Pune&Gurgaoninsearchofthenextbig CanToyotasIshiirecreateQualis FlipkartvsSnapdeal:2starsof businesseslikeNetflixandsomethatuseamixofsubscriptionandadstogenerate MagicwithEtios&Liva? consistencyandconfidence idea. revenue(PandoraandLinkedIn).Whattheyshareincommoninearly2014areskyhigh IsArvindSaxenathemantoturn Wewanttobethedestinationo YahoobuyingbingecontinueswithVizify marketpricing,paltryrevenueandsmallornegativeearnings,forthemostpart. GeneralMotorsaround? foreverything:Snapdealfounde takeover Google'sArorasaysmobilewillcreate biggeradvertisingpie Lookingatthepricingofthesecompanies,thevariablethatexplains90%ofthepricing differencesacrosscompaniesisnotrevenueorearnings,butthenumberof users/subscribersateachcompany.Forbetterorworse,investorsarerewarding companiesthathavemoreusersbypricingthemhigher,andtheyareaugmentingthat priceiftherevenuecomesfromsubscriptions(morepredictable)thanfromadvertising.

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Seenfromthisperspective,Facebook'sgamebecomesclearerandmoreunderstandable. Withits1.2billionusers,Facebookhasthelargestuserbaseofanyofthesocialmedia companies,butitisjudgedbythemarketbothonhowmuchitincreasesthisuserbase andonhowmuchtimetheseusersspendonFacebook.WhatsAppisattractiveto FacebooknotonlybecauseitmaybringnewuserstoFacebookbutalsomayincrease

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http://economictimes.indiatimes.com/news/international/business/450-million-users-is-the-magic-number-of-whatsapp-valuation/articleshow/31567709.cms

3/7/2014

450 million users is the magic number of WhatsApp valuation - The Economic Times
Yellen,MarioDraghi,Kuroda,StanleyFischer& MarkCarney LokSabhapollstobeheldinninephasesupto May12countingonMay16 FreeKall:Bangalorestudentslaunchfreevoice callingservicetothosewithoutinternet Top10sectorsthatareexpectedtogivehighest hikes&hireinlargenumber
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theirengagementintheFacebookecosystem.Itistruethatwedonotknowhowmanyof WhatsApp's450millionusersarealreadyonFacebookbutthatisparforthecoursein acquisitions,whereacquirerstakeactionsonfaith,ratherthannumbers. AretheredangersinplayingthisgameforFacebook?Sure.Themarketcouldbe overpricinghowmuchauserisworthinfutureearnings,butifitis,Facebookisatleast partiallyprotectedbythefactthatitisusingitsownstocktopayfor$16billionofthe$19 billion.Shouldinvestorsalsoplaythisgame?Ifyoudoso,youhavetorecognisethatyour successwilldependnotonyourunderstandingofthecompany'sbusinessorfinancial statementsbutinreadingmarketmoodandmomentum,whichcanshiftquicklyand abruptly. (TheauthorisaprofessorofcorporatefinanceandvaluationattheSternSchoolof Business,NewYorkUniversity)
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3/7/2014

450 million users is the magic number of WhatsApp valuation - The Economic Times

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http://economictimes.indiatimes.com/news/international/business/450-million-users-is-the-magic-number-of-whatsapp-valuation/articleshow/31567709.cms

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