It's great, but it's not $19B great.

[edit] Seems my comment is being misunderstood. My point was that FB wouldn't pay $19B unless they planned to monetize beyond the $1/user/year model.

$19B is actually a really reasonable price for Whatsapp if you're FB, though it wouldn't be the same for other buyers. Whatsapp not only has a great business, they posed a direct threat to FB's business. It's a large price/earnings multiple but it's really not outrageous considering.

Edit: responding to your edit:

> My point was that FB wouldn't pay $19B unless they planned to monetize beyond the $1/user/year model.

Maybe. I think it's more likely that the social industry has started to peak, and that we'll continue to see FB at the top, buying off small companies as they become threats. Take a look at the movie industry, or any industry with a traditional "Big 4" group of companies.

WhatsApp was not worth $19B, it was worth $19B to Facebook.

You're worth whatever someone is willing to pay for you.

Not $19B great for _you_.

In other words we can go with your price analysis or with the actual number paid for it. I'll go with the actual number.

A simpler example: Is this bottle of wine worth $200? Maybe not to you...You can make fun of that price. That's cool, free speech, say what you want. But it is selling at that and someone keeps paying that amount for it.

Only a small percentage of their users have ever paid. Most users get to use it free of charge every year.

And? The more important information would be the conversion rate of users that have been asked to pay. Whatever it is, they're still miles ahead of instagram/twitter/snapchat ever charging for use.

While this writeup may be meaningless in the long term it's still nice to see in comparison to other apps of the "moment".

Interesting, why is that?

How do you do that? I paid. I had no intention of paying until I realised Vodafone Spain charged me 80 cents (euro cents) for a text to my Mum in the UK. A text conversation between us had cost me 8Euros, and some of them were just yes / no replies. After that Whatsapp seemed like a bargain.

$500M/yr in raw revenue? How do you grow from there? Lower costs? Grow your revenue? Half a billion is getting close to max adoption. Do you up your prices?

I'll stick with just getting $500M/yr. That is more than most start-ups will ever make.

Once I get there I can solve other problems as they come up. Would that be a reasonable approach?

Elsewhere in this thread someone mentioned Whatsapp have $58M of funding, so I doubt it - that'd probably be seen as a huge failure..somewhat amusingly. Let's say them investors want their 10X within a few years so you need to pay them over a year's revenue over a few years with no real growth there - you're paying a lot and they'd probably not agree.

Possibly upsell to some premium set of services, or branch out into other business lines. E.g., Amazon's not just a bookstore any more.

Simple phone messaging, not likely.

But where does phone messaging lead to?

• Other comms services (voice, voicemail, teleconference, video). There's room for improvement in all of these. Look at the one stand-out from G+: Hangouts.

• Sales or transactions. From text messaging to commerce-via-text is a step. Or banking. Both are directly monetized.

• Some level of community-based information service with a commercial component. I've long wondered why more of the social networks haven't gone here.

Or, of course, "get bought by Facebook".

Remember how small Whatsapp is (~50 employees). They don't need to do any of those things to have a fantastic business for a long time to come.

What's to stop a free alternative like Telegram taking all the market? Smartphone adoption is still happening here, and I use the rates are much lower in developing countries. Once word gets around maybe everyone will switch.

Network effect.

The key though is that Telegram actually isn't free to consumers when compared to Whatsapp. At $1/year + access to everyone who is already on network vs. $0/year + access to smaller network+need to invite your friends to build that network Whatsapp is actually (significantly) cheaper. If it was more expensive per year I think they'd be giving some room, but no one is even going to notice getting billed.

I don't think they're close to adoption. There are 7Bn phones in the world and growing. Granted a chunk are corporate which won't ever need WhatsApp, but most in third world countries still use burners.

And although there is likely a slow take up by the elderly, the next generation are all new customers. The 1/5th smartphone ratio can only go up. (This POV is of course assuming WhatsApp wins the messaging war, which is what FB is betting on)