Someone mentioned about trying to find out if their have ever been any other chat services that have really made a lot of money on it's own, and it sparked memory of an acquisition that didn't happen quite that long ago, Microsoft buying Skype in 2011, and here is a good recent article about it:
• Problems monetising it: revenues at the time – $860m for the year, losses of $7m – amounted to just $1.30 per user per year
So, here we have a company, at acquisition, that was making close to the $1 per year per user that WhatsApp is charging. At the end of 2010 skype had 663 million users and was acquired for $8.5 billion. That's $12.82 a user.
Then, as now with WhatsApp, people are questioning whether Microsoft would ever make enough money to justify such a price. Then, as now, people justified the price based on the sort of intangibles (getting rid of a competitor, strengthening the brand, tapping new markets, etc.) the WhatsApp acquisition is being justified with now.
But there is still the big difference that Facebook, with a business in a similar space (obviously still different but they both are chat/communication based), with a similar revenue model per user per year, but only 3 years later purchased it for $42.22 per user. That's almost 4x the price for a similar acquisition 3 years apart.
And people thought Microsoft was crazy for the price they paid for Skype ... it kind of makes you wonder what the hell is going on.
I still remember back in 2000 when we still had AOL. I was eight or nine and I had my own aol account. You could have a dozen or so sub accounts on the main one. And because it was a "kids account" there were chat rooms for kids. Being the lovely kid that I was, of course I went into one and was like "how the f*ck are you all?"
Well the kid chat rooms were moderated and our entire AOL account was disabled. My mom had to call to have it re-enabled and of course they told her what I had said.
I remember I used to enter the chat rooms by saying "Ever dance with the devil in the pale moon light?" Being a popular quote from the original Batman movie and it went well with my screen name (xsatanx) it usually got a laugh...
... until I stumbled into a religious chat room.
Got my account disabled and had to have my mom call as well.
when my folks got me a modem, the only thing my father made me understand was the phone bill values... i was 7 or younger. learned all about initialization strings and the minimal about terminal emulation to get to the message and mud games part of some bbs. after that it was downhill.
I assume the motivation for pulling this out of the archive is the WhatsApp purchase. However, I don't think this comparison is truly fair. Not only is WhatsApp monthly adding over twice the userbase ICQ had at the time of purchase, but it is also actually collecting revenue from them. WhatsApp is a real company with real monetization strategies.
ICQ in 1999 had about 45 million users. There were only 248 million internet users back in 1999. That's 18% of mostly international users.
AOL was optimistic. So much so this is the actual response when they beat the street during their earning reports.
"(ICQ is) growing like a weed," said AOL President Bob Pittman. "Monetizing it" will be "relatively easy," he added.
WhatsApp has 450 million users where there are 2.7 billion internet users. 16%. Of mostly international users. Where, again, monetizing it, should be relatively easy.
But then again, why does any of this matter?
Genie's out of the bottle. The game has changed. We're playing a game of scaling now. Less than a hundred dedicated folks can change the world.
That 19 billion is a clarion call to attract even more people to what it is most of us here have been doing for decades.
If there is to be a singularity moment for the generation that grew up remembering the difference between real life and internet life, we have arrived at the internet life.
Whatsapp makes extremely little revenue right now - like it would take Facebook hundreds of years to recuperate what they paid [1]. Even if it doubles in user-base and grows by an order of magnitude (on top of that) through some magic Facebook monetization strategy, it would still take them decades.
But if we discount the fact that Facebook mostly paid their own "worthless" (mostly overhyped/overvalued) stock for this overvalued Whatsapp acquisition, then maybe with an order of magnitude profit, they could recover the money somewhere between 10-20 years.
For Facebook's sake, they better hope some other new disruptive technology doesn't come along in the next 10-20 years, because they won't be able to keep this sort of acquisition strategy for long.
I've noticed some articles call Facebook/Zuckerberg "smart" for noticing Whatsapp is disrupting them - if you can call noticing a disruption so late in the game that you now have to pay $19 billion to buy it, and with almost zero expectations of recovering the bulk of the money in the next decade.
What would be much smarter is using your own engineers to build that next disruption, or at least buy the ones appearing very early in the game. Zuckerberg could've bought tens of such apps in their early days a few years ago, and he'd still be much better off today. He could've owned Whatsapp, Kik, Viber, Line, and many others for much less.
[1] - Analysis of Whatsapp's revenue and profit when it had half the user-base it has today:
52535425. And then I was so angry when that "children under 13 can't use the internet" or whatever act went into effect and I got locked out of it (young and stupid enough to put my real birth date!). I made a new account but can't remember the ID, I stopped using it pretty quickly after that.
I'm going to speculate that this is a very strategic move from Facebook. Remember BlackBerry Messenger? one of the early selling points of the phone was that BBM let you communicate for free, instantly, with people all over the world. It was pretty revolutionary at it's time.
Facebook is already becoming the world's phonebook. Connect with someone and you have a way to contact them.
Facebook is also heavily pushing it's messaging app on the main Facebook app. I think that WhatsApp will be integrated with (or replace) Facebook messenger.
This combination builds a powerful base for an eventual Facebook phone with a free data/voice plan (the phone would have a base price, but service would be free thanks to the sale of ads ala Kindle Special Offers). Think about it -- if you could call, text, and message all of your contacts, for free, from within the Facebook app, why wouldn't you do it?
If Facebook follows that strategy, they will get their 19 billion out of this deal for sure.
Well, 300M for 12M users, which is a lot fewer than the services that get bought for big numbers today.
But magnitude of the money aside, has an online messaging service ever been able to really turn a huge profit? chongli points out that AOL eventually sold ICQ for less than they paid, and I can't think of any others off the top of my head (AIM didn't prevent AOL from being overtaken by Facebook, say). They seem to be very un-sticky in terms of user retention by their nature.
$19 billion and whatsapp has 465 million users, and ICQ was purchased for $287 million had 12 million users at the time. $40 dollars per user vs $24 dollars per user.
Now if the goal were to acquire users. its far more likely that facebook would have a huge overlap in the number of users it has already and those on whatsapp. That means maybe a cost of acquisition at let's completely speculate $100 dollars per user(maybe more). It seems kind of silly. but then you think about their penetration in developing markets and network effects... I don't know I'm not zuck.
BUT on a complete tangent of my comment. I should start an Israeli chat company. they've had some big exits.
Is it bad that I can still remember my 7 digit ICQ number? It's probably been over 14 years since I've used it. I use to judge everyone that used AIM but eventually I switched over to AIM because all my friends in school had AIM.
It's funny how these ICQ like messenger applications always end up being bought out with heaps of money. When you see it all over for the nth time than its just funny.
I mean: you are supposed to learn a real profession so that you will be able to create real value, whereas real value is actually assigned to messenger apps.
12834982 -- can't believe I can still remember it. I haven't signed on in well over a decade. Kinda proud, not gunna lie. And according to Google, my last nickname was "Blake's Alright", must have been going through some teenage melancholy at the time, haha
And since this is HN, you probably wonder where the ICQ founders are now? As far as I know, 3.5 out of 4.5 (one quit early) are busy having fun and enjoying life, and the remaining one has since started and sold companies for $100m each at the rate of about one per two years.
Just a naive comparison, AOL paid ~24MM/user for ICQ. Facebook is paying ~42.3MM/user for WhatsApp. That's about 76% more. IRC wasn't making any money when it was acquired. WhatsApp was making some.
[+] [-] efuquen|12 years ago|reply
http://www.theguardian.com/technology/2013/aug/30/skype-micr...
The bullet point that stands out for me is this:
• Problems monetising it: revenues at the time – $860m for the year, losses of $7m – amounted to just $1.30 per user per year
So, here we have a company, at acquisition, that was making close to the $1 per year per user that WhatsApp is charging. At the end of 2010 skype had 663 million users and was acquired for $8.5 billion. That's $12.82 a user.
Then, as now with WhatsApp, people are questioning whether Microsoft would ever make enough money to justify such a price. Then, as now, people justified the price based on the sort of intangibles (getting rid of a competitor, strengthening the brand, tapping new markets, etc.) the WhatsApp acquisition is being justified with now.
But there is still the big difference that Facebook, with a business in a similar space (obviously still different but they both are chat/communication based), with a similar revenue model per user per year, but only 3 years later purchased it for $42.22 per user. That's almost 4x the price for a similar acquisition 3 years apart.
And people thought Microsoft was crazy for the price they paid for Skype ... it kind of makes you wonder what the hell is going on.
[+] [-] JoshGlazebrook|12 years ago|reply
Well the kid chat rooms were moderated and our entire AOL account was disabled. My mom had to call to have it re-enabled and of course they told her what I had said.
Fun times...
[+] [-] bcsmith|12 years ago|reply
... until I stumbled into a religious chat room.
Got my account disabled and had to have my mom call as well.
[+] [-] codezero|12 years ago|reply
By 2000 you probably missed the volunteers, but still interesting.
[+] [-] gcb0|12 years ago|reply
[+] [-] slg|12 years ago|reply
[+] [-] alaskamiller|12 years ago|reply
ICQ in 1999 had about 45 million users. There were only 248 million internet users back in 1999. That's 18% of mostly international users.
AOL was optimistic. So much so this is the actual response when they beat the street during their earning reports.
"(ICQ is) growing like a weed," said AOL President Bob Pittman. "Monetizing it" will be "relatively easy," he added.
WhatsApp has 450 million users where there are 2.7 billion internet users. 16%. Of mostly international users. Where, again, monetizing it, should be relatively easy.
But then again, why does any of this matter?
Genie's out of the bottle. The game has changed. We're playing a game of scaling now. Less than a hundred dedicated folks can change the world.
That 19 billion is a clarion call to attract even more people to what it is most of us here have been doing for decades.
If there is to be a singularity moment for the generation that grew up remembering the difference between real life and internet life, we have arrived at the internet life.
10593577
[+] [-] ama729|12 years ago|reply
Yes and no, they only got 20 millions in revenue last year, not even profit:
http://www.forbes.com/sites/parmyolson/2014/02/19/exclusive-...
[+] [-] higherpurpose|12 years ago|reply
But if we discount the fact that Facebook mostly paid their own "worthless" (mostly overhyped/overvalued) stock for this overvalued Whatsapp acquisition, then maybe with an order of magnitude profit, they could recover the money somewhere between 10-20 years.
For Facebook's sake, they better hope some other new disruptive technology doesn't come along in the next 10-20 years, because they won't be able to keep this sort of acquisition strategy for long.
I've noticed some articles call Facebook/Zuckerberg "smart" for noticing Whatsapp is disrupting them - if you can call noticing a disruption so late in the game that you now have to pay $19 billion to buy it, and with almost zero expectations of recovering the bulk of the money in the next decade.
What would be much smarter is using your own engineers to build that next disruption, or at least buy the ones appearing very early in the game. Zuckerberg could've bought tens of such apps in their early days a few years ago, and he'd still be much better off today. He could've owned Whatsapp, Kik, Viber, Line, and many others for much less.
[1] - Analysis of Whatsapp's revenue and profit when it had half the user-base it has today:
http://www.quora.com/WhatsApp-Messenger/How-much-revenue-is-...
[+] [-] jgalt212|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] pyvpx|12 years ago|reply
[+] [-] drawkbox|12 years ago|reply
[+] [-] nailer|12 years ago|reply
[+] [-] NDizzle|12 years ago|reply
I no longer have access to the @r33t.org email address, nor do I know the password. Unfortunate.
edit: Looking at the profile it seems that a Russian hacked/took over the account who knows how long ago.
[+] [-] jforman|12 years ago|reply
Thought about selling it on ebay, since six-digit accounts used to fetch a non-trivial amount of money. But decided it wasn't worth the $100.
[+] [-] kaivi|12 years ago|reply
[+] [-] w1ntermute|12 years ago|reply
[+] [-] codezero|12 years ago|reply
Probably we remember because the client made you type it to log in? I forget, but I feel like this is true :)
[+] [-] krstck|12 years ago|reply
[+] [-] grigory|12 years ago|reply
[+] [-] mads|12 years ago|reply
[+] [-] gee_totes|12 years ago|reply
Facebook is already becoming the world's phonebook. Connect with someone and you have a way to contact them.
Facebook is also heavily pushing it's messaging app on the main Facebook app. I think that WhatsApp will be integrated with (or replace) Facebook messenger.
This combination builds a powerful base for an eventual Facebook phone with a free data/voice plan (the phone would have a base price, but service would be free thanks to the sale of ads ala Kindle Special Offers). Think about it -- if you could call, text, and message all of your contacts, for free, from within the Facebook app, why wouldn't you do it?
If Facebook follows that strategy, they will get their 19 billion out of this deal for sure.
[+] [-] alexeisadeski3|12 years ago|reply
It was not.
[+] [-] cmarschner|12 years ago|reply
[+] [-] hazelnut|12 years ago|reply
[+] [-] digz|12 years ago|reply
For context, I rarely remember my anniversary.
EDIT: I just logged in. Out of the hundreds of contacts I had, there's one sad guy still online.
[+] [-] WaterSponge|12 years ago|reply
Which one is it?
[+] [-] majormajor|12 years ago|reply
But magnitude of the money aside, has an online messaging service ever been able to really turn a huge profit? chongli points out that AOL eventually sold ICQ for less than they paid, and I can't think of any others off the top of my head (AIM didn't prevent AOL from being overtaken by Facebook, say). They seem to be very un-sticky in terms of user retention by their nature.
[+] [-] chongli|12 years ago|reply
[+] [-] securingsincity|12 years ago|reply
Now if the goal were to acquire users. its far more likely that facebook would have a huge overlap in the number of users it has already and those on whatsapp. That means maybe a cost of acquisition at let's completely speculate $100 dollars per user(maybe more). It seems kind of silly. but then you think about their penetration in developing markets and network effects... I don't know I'm not zuck.
BUT on a complete tangent of my comment. I should start an Israeli chat company. they've had some big exits.
[+] [-] securingsincity|12 years ago|reply
[+] [-] colinbartlett|12 years ago|reply
The US is Facebook's biggest market but I would bet the US is no where near the top of WhatsApp's market list.
[+] [-] MichaelTieso|12 years ago|reply
[+] [-] fletchowns|12 years ago|reply
[+] [-] p4bl0|12 years ago|reply
[+] [-] porter|12 years ago|reply
[+] [-] MichaelMoser123|12 years ago|reply
I mean: you are supposed to learn a real profession so that you will be able to create real value, whereas real value is actually assigned to messenger apps.
[+] [-] BlakePetersen|12 years ago|reply
[+] [-] beagle3|12 years ago|reply
[+] [-] iamsalman|12 years ago|reply
[+] [-] jcurbo|12 years ago|reply
[+] [-] bane|12 years ago|reply
[+] [-] MichaelGG|12 years ago|reply
[+] [-] eyeareque|12 years ago|reply
[+] [-] chris_wot|12 years ago|reply
[+] [-] coltr|12 years ago|reply
[+] [-] ninive|12 years ago|reply
[+] [-] petercoolz|12 years ago|reply