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How Jan Koum Steered WhatsApp Into $16B Facebook Deal 136

Posted by timothy
from the ok-today-I-can-supersize-it dept.
First time accepted submitter paulbes writes "Jan Koum picked a meaningful spot to sign the $19 billion deal to sell his company WhatsApp to Facebook [Wednesday]. Koum, cofounder Brian Acton and venture capitalist Jim Goetz of Sequoia drove a few blocks from WhatsApp's discreet headquarters in Mountain View to a disused white building across the railroad tracks, the former North County Social Services office where Koum, 37, once stood in line to collect food stamps. That's where the three of them inked the agreement to sell their messaging phenom –which brought in a minuscule $20 million in revenue last year — to the world's largest social network." Forbes overstates the apparent selling price by a few billion dollars; big numbers, either way. [Update: 02/20 13:51 GMT by T : The $19 billion makes sense, if you include retention bonuses in the form of restricted stock units.] Another reader points out the interesting fact that "Acton — himself a former Apple engineer — applied for jobs at both Twitter and Facebook way before WhatsApp became a wildly popular mobile app. Both times he was rejected."
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How Jan Koum Steered WhatsApp Into $16B Facebook Deal

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  • Take that SnapChat!

    • by cayenne8 (626475) on Thursday February 20, 2014 @11:43AM (#46294927) Homepage Journal
      Am I the only person that had never heard of "WhatsApp" prior to news of this buyout?
      • by Anonymous Coward

        Apparently you're not one of the 400M global users certainly. However, I think the keyword there is "global"; it seems to be pretty prevalent in non-Western countries from what I can gather.

        • by JeffOwl (2858633) on Thursday February 20, 2014 @01:42PM (#46296105)

          However, I think the keyword there is "global"; it seems to be pretty prevalent in non-Western countries from what I can gather.

          Yes, it's the David Hasselhoff of messaging apps

        • by rasmusbr (2186518)

          Apparently you're not one of the 400M global users certainly. However, I think the keyword there is "global"; it seems to be pretty prevalent in non-Western countries from what I can gather.

          Yep, and presumably among teenagers and children in western countries, the ones who presumably hold the dagger that could kill any of the incumbent social networks.

          • by jsepeta (412566)

            my daughter and her friends despise facebook. now they'll need to find a new messaging app.

            as for me, i dumped instagram after the facebook sale. zuckerberg is an ass.

      • by Frederic54 (3788)
        No don't worry, I have no clue what it is too, and paying 19B for something like this seems nonsense?!?
      • It's super popular in India.
  • I hear that (Score:5, Funny)

    by Chrisq (894406) on Thursday February 20, 2014 @09:53AM (#46294109)
    I hear that facebook also offered $19 for slashdot beta.
    • by Anonymous Coward
      To be fair, they really just needed quarters for the meter.
    • by TWX (665546)
      You sure that it wasn't $0.19?
    • by goombah99 (560566) on Thursday February 20, 2014 @10:45AM (#46294447)

      During the Holland Tulip bubble, tulips became worth enormous amounts and some, like a black tulip, were exceedingly. Reportedly, the owner of a black tulip bought what he believed was the only other black tulip in existence for a prodigious sum, and then crushed it with his foot. "HaHa! Now I have the only one!" (only in Danish).

      whats.app had absolutely no intellectual property and it would take less than 1 million dollars to produce a polished work-alike. All the Facebook bought was it's customer list, nearly all of which probably already use facebook.

      The tulip age has returned again. Pets.com zombies walk the earth.

      • by josgeluk (842109)

        "HaHa! Now I have the only one!" (only in Danish).

        Strange. Why would he have spoken Danish?

      • by jittles (1613415)

        During the Holland Tulip bubble, tulips became worth enormous amounts and some, like a black tulip, were exceedingly. Reportedly, the owner of a black tulip bought what he believed was the only other black tulip in existence for a prodigious sum, and then crushed it with his foot. "HaHa! Now I have the only one!" (only in Danish).

        whats.app had absolutely no intellectual property and it would take less than 1 million dollars to produce a polished work-alike. All the Facebook bought was it's customer list, nearly all of which probably already use facebook.

        The tulip age has returned again. Pets.com zombies walk the earth.

        Facebook did not buy the customer list. They bought the chat history of millions of people. They are going to mine those chat histories and use those to expand the dossiers they have on their users. Also WhatsApp is popular in a lot of countries and markets where Facebook adoption is somewhat low.

      • by ultranova (717540)

        whats.app had absolutely no intellectual property and it would take less than 1 million dollars to produce a polished work-alike. All the Facebook bought was it's customer list, nearly all of which probably already use facebook.

        No, what Facebook bought was a lack of a competitor. Facebook is, at the core, a wiretapped communication medium that sells analyses of the aggregate wiretapped data. Every alternative communication channel competes with them.

      • by timeOday (582209)
        75% of the $19BN is in facebook stock, so it's more like trading some tulips for some other tulips.
        • by goombah99 (560566)

          75% of the $19BN is in facebook stock, so it's more like trading some tulips for some other tulips.

          True from the point of view of whats.app. But that facebook stock was bought by investors using actual money and with the shares at a 100:1 P/E ratio, they probably are hoping not to spend money wisely.

      • whats.app had absolutely no intellectual property and it would take less than 1 million dollars to produce a polished work-alike.

        True. But what Facebook is paying for isn't the code. It's the userbase and all the data associated with them. It's a strong quasi-contender with a hefty presence in an overlapping market segment. (Etc... etc...) Replicating those is non-trivial at best. If you think it's so easy and cheap, have at it, I wish you all the luck in the world. But I won't invest the penny I pic

  • Rags to riches... (Score:5, Interesting)

    by TWX (665546) on Thursday February 20, 2014 @10:01AM (#46294169)
    ...does happen, that isn't in of itself actually a surprise, especially when one considers that Mr. Acton had an education and a career that requires either an education or above-average ability (for the sum of humans total).

    The thing that I find disappointing is how the nature of overvaluation in emerging software markets (ie, any software or service that isn't showing a profit) is reaching unsupportable levels. What I want to know is, have the users of these sites started truly fundamentally changing how they behave in terms of being led down certain directions as a result of their use of software-based services like Facebook, and if so will this reflect their purchasing habits? If the answer to the second part is no, then this is just a huge bubble as there is no real inherent value in social media from an advertiser's point of view. Given that advertising is the primary means of driving revenue these days, that spells disaster.

    There was a documentary on PBS the other night about the nature of social media. It first started with the co-opting of youth culture, repackaging it, and reselling it back in the form of MTV in the early noughties, and contrasted to today, where people strive for "Likes" and "subscribers". Some individuals have made personal money successfully, but it doesn't seem to translate well into the corporate profit engine well. Persons and small businesses are unlikely to afford to buy advertising through social media, so I don't see how Facebook et al are going to profit substantially from this bottom-up form of media.

    And I expect the bubble to burst. Both for individual companies (Facebook replaced MySpace, something will replace Facebook) and for the industry as a whole.
    • by alen (225700)

      small businesses are the ones who should be buying ads through social media
      regional TV is still too expensive for a small business like a restaurant or a club
      you buy followers on twitter and facebook and update the streams for your fans

      • by TWX (665546)
        On the other hand, buying TV or radio time in one's market is a guaranteed way of knowing that the money that you've spent is paying for something that's being properly implemented, as in locally. It's intuitive that a local affiliate station will only broadcast the ad in its geographic area. It's also fairly easy to confirm that one's ad is being played if one buys time during a given timeslot as one can simply listen to the radio or watch TV to confirm.

        Buying online advertising is less intuitive. Th
    • by Bill Dimm (463823)

      it doesn't seem to translate well into the corporate profit engine well

      Advertising dollars spent on Facebook may be detrimental [youtube.com] for companies buying "likes" through Facebook (even directly, not 3rd party). When advertisers figure that out, Facebook is done.

    • The added value of social media and search engines to advertisers is targeted advertising. Not because these ads result in big changes in purchasing habits of the viewers, but because they allow my product to be offered to people who are potentially interested in it, as opposed to whomever happens to be watching. That makes advertising affordable, especially for small businesses.

      I couldn't afford an ad on national TV let alone something on an international medium. I might be able to afford one on local
    • Re: (Score:2, Insightful)

      by Reapy (688651)

      I like the part where they paint the guy as a food stamp collecting dude, but later in the article he 'lived off the 400,000 he had saved'. That is definitely not a poor person who has 400k laying around in bank accounts, at all.

      • by geekoid (135745)

        When he was a child he and his mother need food stamps. He later worked at Yahoo, and others, and didn't need food stamps then.

        I like the part where you need to not think and just cherry pick so you can deal with the fact you will never have money or accomplish anything.

        Every one should take a lesson there. Live frugal and you can save a lot of money. There will always be toys to spend money on, no need to live on the edge of your income.

    • by Tom (822)

      I wish for the bubble to burst, but I don't think it will.

      Here's a dark secret of the advertisement industry: Not only are we not the customers of Facebook, but its product, but just the purpose of the advertisement industry is not to sell the products of its customers - it is to sell its customers more advertisement.

      The main product of ad agencies are themselves - telling everyone that they need to advertise, and advertise more, and have you seen your competitors? you have to beat them...

      So I expect the bu

    • by gnick (1211984)

      ...have the users of these sites started truly fundamentally changing how they behave in terms of being led down certain directions as a result of their use of software-based services like Facebook, and if so will this reflect their purchasing habits?

      Yes. Even if 5% of FB users have used Candy Crush, and only 10% of those drop $.99 twice a month on "lollipop hammers" or some such, that's still $150M+/year - On an imaginary product with infinite free supply. And if targeted advertising was ineffective, then a lot of very successful companies & governments have wasted a lot of money on it spanning decades.

      Decades of repeated success strongly suggests that these companies have found an effective market strategy. That said, I do believe that FB is a

  • ...that the money for this transaction ultimately comes from all of us. We bought the products and services of the companies whose marketing and advertising rely on Facebook. And those of us who have FB accounts, (along with those of us who don't do our best to stop FB tracking us all over the Web), have made Facebook at least look like it's worth the money those companies hand over to it. That's how Facebook can pay almost a thousand years' of WhatApp's current revenue for the fledgling company.

    • ...that the money for this transaction ultimately comes from all of us. We bought the products and services of the companies whose marketing and advertising rely on Facebook. And those of us who have FB accounts, (along with those of us who don't do our best to stop FB tracking us all over the Web), have made Facebook at least look like it's worth the money those companies hand over to it. That's how Facebook can pay almost a thousand years' of WhatApp's current revenue for the fledgling company.

      A large part of what Facebook is paying for is to not have their position threatened. A large part of what built Facebook was photo sharing, can't risk anyone steal that position from them, which is why they also bought Instagram. Seeing it as a $19B investment to safeguard their $170B valuation makes more sense than trying to find the value in current SnapChat business.

    • by ledow (319597)

      Sorry, but I've given Facebook precisely zip.

      My having an account is not going to turn into a guilt-trip to make me think I'm funding idiocy like this. Facebook isn't worth what its share prices say its worth, any more than WhatsApp is worth anything even APPROACHING a billion, let alone 19 of them. But it's not my fault.

      If someone is stupid enough to give Facebook / Whatsapp this kind of money, it's certainly not someone like me. If they are paying that to try to reach me, more fool them. If you don't

      • by geekoid (135745)

        IN 2103 Facebook has nearly 8 billion in revenue and about 2.5 billion in operation income..
        In one year it's profit went from 60 million to 580 million.

        I'm sorry, you were saying Facebook Doesn't make any money?

        IF you use faebook, then you are making facebook money.
        Not that it's right or wrong to use facebook.

        • by ledow (319597)

          A couple of dollars, per quarter, per user. From advertisting. Sure, there are users giving money to Facebook directly but - NOT ME. And not most people, obviously.

          http://venturebeat.com/2013/10... [venturebeat.com]

          The money comes from advertisers. Do those advertisers make that money from users? Pretty much no. They might think that, but they aren't. We're not giving advertiser's money, lots more money than we are directly pumping into Facebook by buying in-game currency etc.

          Someone else is. Businesses are. Whether

      • They don't make money from you, they make money from selling your data to other companies... that's why user numbers are important!

  • Web Bubble 2.0 (Score:5, Insightful)

    by Anonymous Coward on Thursday February 20, 2014 @10:05AM (#46294209)

    Nineteen billion for a glorified instant messenger.

    • Re:Web Bubble 2.0 (Score:4, Insightful)

      by codeButcher (223668) on Thursday February 20, 2014 @10:27AM (#46294325)

      Nineteen billion for a glorified instant messenger.

      well, you have to admit that it is an instant messenger that sends the address book of the user to the company's servers for further "use" [wikipedia.org] (spamming, so far, so far we know). IMs did not use to do that. Fits well with FB's business model. The service being delivered is not communication. It is advertising.

    • by alen (225700)

      facebook also has a IM
      how would it cost them to market it until they get over 450 million users? or just buy a company

      • That was exactly the motivation behind the offer for SnapChat: billions of $ for a service that could be replicated with little effort on Facebook's existing platforms. It was not the service or the tech they were after, but the users, and specifically the younger crowd. Same motivation behind Google's offer. It's the "eyeballs" of the 90s all over again.
  • Success is always attributed to the extraordinary skill and foresight of the winner: http://psychology.about.com/od... [about.com]. Queue the endless blogs and Forbes' deep analysis heaping accolades on Jan and his demonstrable $16B greatness. Good on Jan for striking it lucky, spare a thought for the thousands, just as worthy, that the dice did not favor, nothing more nothing less.
    • by stenvar (2789879)

      Success is always attributed to the extraordinary skill and foresight of the winner

      And that's a correct thing to do in business. With few exceptions, extraordinary skill and foresight are necessary to win big in business, but they are not sufficient; the kind of skills that matter, however, may not be what you personally value or recognize.

      Good on Jan for striking it lucky, spare a thought for the thousands, just as worthy, that the dice did not favor, nothing more nothing less.

      Getting $19 billion for the c

    • by D-Fly (7665)

      As you say, cue the fawning [forbes.com] Forbes ''analysis.'' [forbes.com]

      The fact that Jan was on food stamps just a couple of years ago and now is worth something like 10 billion dollars on paper should say...something to all of the right wing assholes who hate on the poor for being shiftless losers, and who try to destroy the tiny little safety nets this country has left for people on the edge of starvation or homelessness.

  • by rjstanford (69735) on Thursday February 20, 2014 @10:13AM (#46294249) Homepage Journal

    Facebook is going mobile - as are many (most) other players. This is one of the few mobile messaging networks that has a reach big enough to pull users away from Facebook. $19B is a reasonableamount of money to spend on defense to make a network that - internationally - is bigger than Twitter disappear as a risk.

    Its not the revenue today, its the customer base (7% of the world population are regular users and its still growing rapidly). We're not used to international phenomenons like this, so of course the numbers look huge as absolutes. $38/customer is still a lot for a pure acquisition, so if they hadn't become large enough to be a credible threat they'd likely never have seen that much, but they did... and the rest is history.

    • by Anonymous Coward

      BitTorrent is bigger than Twitter. Twitter isn't that big, it's just mostly visible to the public.

      • by rjstanford (69735)

        BitTorrent is bigger than Twitter. Twitter isn't that big, it's just mostly visible to the public.

        Having 10-11% of the living population of the entire human race using your platform on a regular basis (best guess removing bots, etc) "isn't that big" to you?

        What, pray tell, would be?

    • by DogDude (805747)
      $19B is a reasonableamount of money to spend on defense to make a network that - internationally - is bigger than Twitter disappear as a risk.

      It's so big that nobody I know has ever heard of it. That's pretty amazing.
    • Its not the revenue today, its the customer base (7% of the world population are regular users and its still growing rapidly). We're not used to thinking like businessmen, thinking strategically, or planning ahead

      There, FTFY.

      And really, that's the issue in a lot of comments on business topics here on Slashdot - when it come to business, most of the denizens making comments are the equivalent of virgin celibate priests writing sex advice columns.

  • by Anonymous Coward on Thursday February 20, 2014 @10:16AM (#46294265)

    They paid this amount for 450+ million users database from around the world their phone numbers, IMEI, MAC addresses, contact lists, ..... list goes on.

    • What happens to people who used WhatsApp so they could IM on their phone, without FB getting their phone number? How do I as a user prevent FB from getting my phone number now? Is it too late to delete the app from my phone and request record of it deleted from their service?

      Does it matter because any of my friends have my phone number and are using WhatsApp and thus FB will get it from them if not from me?

      Has that ship sailed?

      • by D-Fly (7665)

        I deleted my Whatsapp account from my phone and my wife's as soon as this news broke for this precise reason. I don't want Facebook having my telephone number, IMEI, router information, etc.

        But you make the very good point that all of my 2 dozen or so Whatsapp contacts that have my phone number will be giving it to Facebook anyway. As we are all well aware, Facebook's backend is VERY good at identifying who you are through its analysis of social networks [viz. the 'People You May Know' feature], so they wil

  • by Anonymous Coward

    The way is shut.

    It was made by those who are Dead,
    and the Dead keep it, until the time comes.

    The way is shut.

  • by stenvar (2789879) on Thursday February 20, 2014 @10:37AM (#46294399)

    I don't get it. Even my shitty low-end cellular plan has unlimited texting, and WhatsApp doesn't seem to be doing much else. I can't even take the WhatsApp account with me when I change phone numbers. And WhatsApp is a big, bloated application.

    Why do people actually use WhatsApp?

    • by kaiser423 (828989)
      Free international texting. In some areas of the globe it's use is near universal, from grandmas to the little kids. In the Middle East and parts of Africa and Asia, a WhatsApp account is literally on over 75% of smart phones.
      • by cayenne8 (626475)

        Free international texting. In some areas of the globe it's use is near universal, from grandmas to the little kids. In the Middle East and parts of Africa and Asia, a WhatsApp account is literally on over 75% of smart phones.

        Interesting, I'd never heard of the app till this story broke about the large $$$ sale.

        So, is this more of a non-US popular app, or is it popular in parts of the US too?

    • by Pope (17780) on Thursday February 20, 2014 @10:56AM (#46294551)

      Not everyone has your texting plan. WhatsApp does group chats very well. That's enough for people to find it useful.

    • by rgbscan (321794)

      Its just an instant messenger. Not everyone has unlimited, or international texting. Using the data plan often makes more sense.

    • You don't get unlimited texting in every country.
    • by Ecuador (740021)
      I have unlimited texting in the UK, but most of my friends are in various countries. I don't like IMs, but when a friend suggested that there is an IM that requires no signup and shows you directly which of your phone contacts are on, I tried it out. So, it works well and you can post pictures and sound into the conversation, hence much better than SMS.
    • by Control-Z (321144)

      I use it to keep in touch with a group of gaming friends, you send one message and everyone in the group gets it. Sort of like a forum, but you can create groups any time you like, invite anyone you like to them, and there is no moderation.

    • by mgcarley (735176)

      I always thought of it like a BBM replacement (which is why I don't get the reason for BBM on Android/iOS) but also

      1. Lots of countries don't have unlimited texting
      2. Free international texting
      3. Texts longer than 160 characters
      4. Group texting (we use it to send status updates to subscribers when we have network outages)
      5. Easy export of message history
      6. Confirmed receipt & reading of messages ...and probably something else.

      As far as taking the account with you when you change phone numbers... I'd cal

      • by stenvar (2789879)

        I always thought of it like a BBM replacement (which is why I don't get the reason for BBM on Android/iOS) but also

        Of course, Skype, Hangouts, and lots of other apps satisfy all those requirements.

        As far as taking the account with you when you change phone numbers...

        Gosh, yeah, like when you move to a different country or switch to another carrier and can't take your number with you.

        • by mgcarley (735176)

          I always thought of it like a BBM replacement (which is why I don't get the reason for BBM on Android/iOS) but also

          Of course, Skype, Hangouts, and lots of other apps satisfy all those requirements.

          As far as taking the account with you when you change phone numbers...

          Gosh, yeah, like when you move to a different country or switch to another carrier and can't take your number with you.

          As someone who moves countries on a fairly regular basis (7-ish times in 10-ish years), I understand that argument better than most, however, for the majority of people that would be a non issue, hence my expression of desiring the option for a username/password to link the account(s) together and/or keep the history etc.

          As for simply moving carrier, number portability is available in many countries - not knowing which country you're from, however, I can't say for certain if it's an option for you.

          As for Sk

          • by stenvar (2789879)

            As for simply moving carrier, number portability is available in many countries - not knowing which country you're from, however, I can't say for certain if it's an option for you.

            Well, it certainly isn't an option when I want to use messaging from a tablet that happens not to have cellular. Whatever, there really is no advantage to not being able to run the messenger app on a tablet or wifi only device or new carrier or whatever.

            As for Skype/Hangouts/etc that's all good and well for those with smartphones,

  • by Tom (822) on Thursday February 20, 2014 @11:00AM (#46294589) Homepage Journal

    I can't hear the "he started out poor" line anymore.

    Yes, one in a million poor people make it. So what?

    • I think it's impressive because he overcame the odds. Compare that to Zuckerberg...........
      • by Tom (822)

        Again, "the odds" aren't as unlikely as you think, given how large the world is. In the words of Tim Minchin: One-in-a-million things happen all the time.

      • by dubbreak (623656) on Thursday February 20, 2014 @05:59PM (#46299251)
        Overcame what odds? His parents are/were a dentist and a psychiatrist. That makes his parent's household income damn near the 1% (definitely 6 figures probably at least 200K/year which would be top 5%). I.e. his family was well off.

        Yes he makes a ton more than his parents, but he's still the same income class. His parents were in the top quintile and so is he. He's just in a richer sub-segment of rich. If he was born middle class or lower it would be overcoming odds (lowest quintile has something like 4% chance of getting into upper or top iirc). Most people end up in the same income class as their parents. There is very little upward mobility and also very little downward for the rich.
  • ...then told the begger on the sidwalk to "get a job" as he left.
  • > Another reader points out the interesting fact that "Acton — himself a former Apple engineer — applied for jobs at both Twitter and Facebook way before WhatsApp > became a wildly popular mobile app. Both times he was rejected." Maybe because Acton is 42.
  • I use Whatsapp. Its useful - especially when you don't have to block ads.
    Facebook gets an address book and can mine whatever the user types into Whatsapp to generate sophisticated profiles of their users. At some stage your profile will be sharper than your friends/relatives know about you, even you about yourself. This can be used for showing ads.
    Here is the issue...where will you show ads?
    Mobile has a serious real estate issue. A decent text ad - like the GMAIL ads - will not work as you cannot cram
  • by DarthVain (724186) on Thursday February 20, 2014 @03:04PM (#46297225)

    http://www.whatsapp.com/ [whatsapp.com]

    "Why we don't sell ads: Brian and I spent a combined 20 years at Yahoo! working hard to keep the site working. And yes, working hard to sell ads, because that's what Yahoo! did. It gathered data and it served pages and it sold ads. We watched Yahoo! get eclipsed in size by Google..."

    Here is what just happened. Using a free app with no ads, some people collected the phone numbers and address books of 450 million suckers. Then for 4 Billion plus some stock, they sold all that information to Facebook, who will in turn re-sell that information selectively based on your Facebook habits directly to advertisers at a premium rate. There is also a messenger app and a bit of tech to enhance the already existing Facebook messenger a bit.

    Part of me thinks the price was so high with stock simply to create a big buzz and get even more suckers to sign up, allowing them to reap more consumer information, etc...

    Have fun getting robocalls for the rest of your existence until you change your phone number.

  • If you think data mining of billions+millions of user accounts is staggering, be aware that NSA already has most of the data that Facebook+Whatsapp has.

Don't steal; thou'lt never thus compete successfully in business. Cheat. -- Ambrose Bierce

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