Everyone may have wondering why the co-founder of Facebook, Mark Zuckerberg willingly bought WhatsApp for $19 billion as the purchase price even WhatsApp was unprofitable at that point in time. Is the purchase price is fair enough for Mark Zuckerberg to pay $19 billion for the loss company? According to Cosentino (2015), she said that social networking competition was strongly dense, and making an industry analysis assumes a crucial importance in order to judge if the price tag paid by Zuckerberg was fair or not. However, in his/her case study preparation stated that the price tag could be reasonable.
Firstly, the answer should consider the desire of Facebook to enhance its customers and market power level in the Global Internet Media Industry:
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The use of a correct WACC is deeply important since a too low discount rate (d) might cause an overvaluation in the NPV of the company under analysis. A discount rate of roughly 10% should ensure a good equilibrium allowing WhatsApp to not be overvalued in the long term way. Looking to the price tag paid by Facebook to purchase WhatsApp ($19 billion), the main conclusion is that WhatsApp was not overvalued and Facebook did not overpay. Morgan Stanley’s analysts estimated that WhatsApp would been able to reach more than 2 billion users by generating an ARPU (average revenue per user) of $2.50 on 2021 at 80% margin of user paying. This analysis was supported by the prediction that WhatsApp could engage 982 million users by the end of 2014, with a total revenue of more 10 than $1 billion by 2017. Analysts were definitely bullish in estimating ARPU level, supposed to reach $3 in 2023. Consequently, EBIT margin will be extremely high (58% in 2023). Aswath Damodaraw, a finance professor at the Stern School of Business of New York, stated: “Normally, for a company to warrant a $19 billion value, it would need to generate about $1.5 billion in after-tax income. WhatsApp is nowhere near that.” Considering the WACC adopted in the valuation (9.72%), the price tag paid by Facebook ($19billion) and assuming a waiting period of five years prior to the steady state (the time before future cash flow income will be delivered), it is possible to obtain the amount
Topic : MySpace and other social networking companies as Internet Advertising Revenues. Factors to consider are the business models for these websites, their rising popularity, and the attraction of brands to advertise themselves in social networking websites (especially MySpace)
Does the Facebook deal signal a new tech bubble? | Talking Numbers - Yahoo Finance. 2014. Does the Facebook deal signal a new tech bubble? | Talking Numbers - Yahoo Finance. [ONLINE] Available at: http://finance.yahoo.com/blogs/talking-numbers/does-the-facebook-deal-signal-a-new-tech-bubble-193203053.html. [Accessed 29 May 2014].
Despite one of the worst initial IPO offerings in history, Facebook managed to rise above it. Face book reported a steady increase in both DAU, MAU’s and global usage from 2010 to 2014. From 2010 to 2014 Facebook reported a change in sales from 531%. This is an astronomical number and extremely impressive from a company in just four years. As a business grows so do the cost of a business as expected Facebook also realized a change in costs to be around 167%. In 2014, Facebook also reported a healthy ROI or return on investments of 8%. This isn’t an extremely high ROI but it is the best way to identify profitability. It would be very healthy if it was anywhere between 10-15%. However, for how well Facebook is doing a conservative ROI is feasible. The most interesting financial factor is Facebook’s long term debt. It was at an all-time high of 1,991 million in 2012 but reduced it down to 119 million in 2014, this is a change of -94%. Facebook has proven to manage its cost as well as show extremely high increases in profit and ROI. Financial statistics like those
For everyone in the business world, Mark Zuckerberg is a well-known name to them. He is an undeniably young, successful businessman. However, Zuckerberg is also a very successful leader in his own company as well as in the world. His impact from creating Facebook is more than just impressive. Zuckerberg created the social media website where people get connected virtually and led the company to incredible success. Zuckerberg’s leadership style can be seen with inspirational motivation, intellectual stimulation, and idealized influence. With all the aforementioned components, Mark Zuckerberg is a great example of transformational leadership.
Later. Mark and Eduardo will meet Sean Parker, the co-founder of Napster, who will give him some interesting suggestions to improve the network and make more money with it. Six years and 500 million friends later, Mark Zuckerberg is the youngest billionaire in history, but for this entrepreneur, success leads to both personal and legal complications. The Winklevoss twins and Eduardo Saverin sue Zuckerberg for several reasons. Through a series of flashbacks during the legal actions, we’ll learn the complicated origins of the most popular social network in the world: Facebook.
...hat social norm is just something that has evolved over time.” Mark describes he’s infulence on privacy. The effect Facebook has had on Americans, on the world, is beyond words. The terms ‘friend me’ or ‘facebook me’ is a common saying. Mark Zuckerberg’s accomplishments have not only affected members of his websites but have affected all of us, each in a different way. “And it seems very likely that Facebook will continue to enhance the lives of an enormous number of people for years to come. Mark Zuckerberg’s little dorm-room production has grown into one of the most influential companies on the internet.”(Mezrich, 255) Despite opinions of Facebook or of Mark , he is truly an amazing entrepeneur, programmer, developer, and man. What it takes to become the world’s youngest billionaire of all time is unknown, but whatever it is, Mark Zuckerberg has certainly got it.
In April of 2012, Facebook announced that it would buy Instagram, an online mobile photo/video-sharing social networking app. The acquisition cost Facebook approximately $1 billion in cash and stock, in attempts to provide Facebook with a strengthening mobile player that would continue to reel in new audiences of all ages worldwide. Instagram was launched in 2010, and had around 30 million active users by the time the acquisition was met—the largest audience of any startup ever to be purchased by Facebook. The acquisition was a notable step for Facebook, whose mobile site became a weakness in past years. Purchasing Instagram was Facebook’s chance to resolve this issue, as Instagram was the most downloaded application on the iPhone at the time.
Social media has helped businesses grow in tremendous ways especially in brand awareness. Lets face it, when we are signing on to our social networks, checking our email, and even looking something up we are constantly bombarded with advertisements. But how else are we going to be aware of a new business or of a different brand that might match up your interest if we aren’t being told it exists. The message needs to be put out there and show the customer that they exist. One big way of the business connecting with the customer or future customer is social networks. Facebook, twitter, YouTube, and LinkedIn have influenced brand awareness dramatically. According to the business2community website there are nearly seventy percent of account ownerships on Facebook globally, nearly fifty percent account ownerships for YouTube,...
In this article it talks about the acquisition of WhatsApp by Facebook. The WhatsApp program which is considered to be an alternative for text messaging was acquired by Facebook in a cash and stock deal worth 19 billion dollars. Facebook became partners with a great brand being that the popularity of its users has gained to 450 million which surpasses the amount of consumers using Twitter by 210 million. The deal established requires that Facebook issue out 3 billion dollars worth of stocks to the 55 employees of WhatsApp during a four year timeframe.
A business has to be social in the virtual world. Facebook, Twitter or YouTube are just some of the social media where a business can post information and be a part of conversation with customers. Social media builds connections, trust and credibility. It’s a place where businesses can engage their clients, share its knowledge, make customers feel appreciated and help solving their problems. Social media not only promotes a business and its reputation, but
Related research demonstrates that consumers are spending 25% of their Internet time on social networking sites, up from15% in 2009 (Nielsen 2010). According to Experian Marketing Services in 2013, 27 percent of time spent online was on social networking. Which shows that people spend most of their online time on social media and its increasing every year. In 2014 smart phones trend is high which also has made easy to connect with social sites. Now Social media usage is not just business-to consumer (B2C), it is also extended to business-to-business (B2B) community. More than 93% B2B marketers use social media to interact with their customers (Holden-Bache 20...
This Essay mainly focuses on the using of the social media in the marketing field. In general marketing means “it’s about communicating the value of a product, service or brand to customers or consumers for the purpose of promoting or selling that product, service, or brand”(Wikipedia). While the Social Media Marketing according to Moran (2008) is “any way to get attention for your message using people connected to the Internet.” Obviously the main goal and purpose of any existing business is to make profit (Fetaji and Demiri 2012). And this is core of the marketing importance whither it a traditional or web base marketing.
Mac, Ryan. "Mark Zuckerberg's Net Worth Up $3.7 Billion As Facebook Shares Soar Following Earnings." Forbes. Forbes Magazine, 25 July 2013. Web. 14 Dec. 2013. . (6)
Parsons, A. (2013). Using social media to reach consumers: A content analysis of official Facebook pages. Academy of Marketing Studies Journal, 17(2), 27-36. Retrieved from http://0-search.proquest.com.mylibrary.qu.edu.qa/
Facebook invested $19 million on a text messaging service, WhatsApp. This stunned the tech world and many investors. WhatsApp was founded by two former Yahoo employees, Jan Koum and Brian Acton in 2009. It was built with merely a 55 persons staff and only 32 engineers - that’s one WhatsApp developer to every 14 million active users. This also means that Facebook paid $345 million per WhatsApp employee. In the past, with a majority of start up companies, the size of the staff behind its company serves as a function in the company’s impact. Many of these same investors say the key to a good entrepreneurial investment: is the entrepreneur’s that don’t want to sell for monetary value, those who aren’t in it for the money, are worth the money.