Where is Facebook Headed with the WhatsApp Acquisition?
I read a lot of stories about this acquisition and the history of WhatsApp. My favorite one is a Forbes exclusive titled: The Rags-To-Riches Tale Of How Jan Koum Built WhatsApp Into Facebook's New $19 Billion Baby. I am truly impressed by the story of Jan Koum and his amazing rise from a poor immigrant to the owner of an extremely successful technology company. I also understand the factors driving WhatsApp's popularity among mobile users.
But I still can't fully comprehend the reasons for the company's very high valuation in its acquisition by Facebook. In my opinion, in any M&A the valuation is based on several factors including future earnings potential, strong synergies and anticipated impact on the competition. In the Facebook/WhatsApp case, the growth potential seems high based on historical trends and the value proposition of the solutions offered by the company. In terms of synergies, it seems that WhatsApp is a great way for Facebook to enhance its messaging capabilities, especially on mobile devices where most of the future demand for messaging and social networking lies. From a competitive point of view, the acquisition seems to have the potential to prevent, delay or otherwise disrupt similar moves by Google, Microsoft or other market participants.
Yet, the price tag still seems very high ... What am I missing?