Albert Wenger:

The winners here are clear: the founders and employees of WhatsApp and the limited and general partners at Sequoia Capital. An additional winner is Google — apparently they tried to buy WhatsApp for $10B and possibly even match the Facebook offer. Who should be most upset? Shareholders and employees of Facebook. Followed by users of WhatsApp who are apparently voting with their feet (or thumbs, as it were) which is likely what is driving Telegram’s sign up rate.

Bingo.

Using my rudimentary skills, I come to much the same conclusion. Assuming all 450 million WhatsApp users are paying customers[1], WhatsApp would generate $450 million in revenue on an annual basis. I will assume the majority of this $450 million is profit. $400 million of profit leads to $19 billion of profit in 47.5 years.

But Facebook apparently intends on making WhatsApp free in the future. And $400 million of annual profit is probably far higher than what WhatsApp actually experiences. Evidently, this deal was never about the current WhatsApp revenue streams.

Therefore, will 450 million additional eyeballs[2] return $19 billion in profits? The $19 billion pushes Facebook into previously untapped markets where WhatsApp has had fair success. But again, will those untapped markets yield $19 billion in profit in the long run? Is there actually $19 billion of value in the big-data acquired with WhatsApp’s 450 million users? $19 billion is a very big number and these questions are hard to answer with only speculative information.

Investors are dumping their money into the future — the potential — of Facebook. What happens if the gamble is wrong? What happens if the only revenue stream Facebook ever experiences as a result of this deal is the current $450 million in annual messaging fees? What happens if that $19 billion is not recovered at some point in the next 50 years?[3]

I honestly wonder if Facebook will even be around in 50 years, let alone making the money necessary to make up for their overpayment of WhatsApp.

Which we can’t do because each customer is given one free year of WhatsApp services. ↩

Sorry, 900 million eyeballs (hopefully). ↩

I guess the obvious answer is, “Oh well. Mark Zuckerberg owns a big messaging company.” Which is better than nothing, but still a major letdown for shareholders. ↩