WHAT’S THE TAKE ON

Finweek English Edition - - INVESTMENT -

Ac­cord­ing to an­a­lyst con­sen­sus fore­cast on FT.com, an­a­lysts are pos­i­tive on the fu­ture of Face­book. Of 57 an­a­lysts polled, 42 ei­ther rate it as a ‘Buy’ or ‘Out­per­form’, 14 rate it as a ‘Hold’ and a sin­gle an­a­lyst con­sid­ers it a ‘Sell’. for over 80% of the com­pany’s R500bn mar­ket cap), have a re­ported com­bined user base of over 1bn, mostly in China. WeChat is also mak­ing sub­stan­tial head­way in Africa.

Lit­tle­wood says: “Glob­ally, What­sApp dwarfs its com­peti­tors, so ul­ti­mately the $19bn that Face­book is shelling out is re­ally about ad­vanc­ing a busi­ness strat­egy that Face­book has had in a place for a At $19bn, What­sApp’s ac­qui­si­tion price is not only steep, it’s un­prece­dented – the largest sum ever paid for a ven­ture­cap­i­tal-backed com­pany. Ex­perts have balked at the price, not only due to the amount it­self but be­cause a $19bn val­u­a­tion for a com­pany that ap­pears to make less than $500m in an­nual rev­enue (it charges users $0.99 a year for the ser­vice, fol­low­ing a one-year free trial) seems to have come out of nowhere.

Thus What­sApp joins YouTube, In­sta­gram, Snapchat and Siri in a league of start-ups with mul­ti­mil­lion-dol­lar val­u­a­tions that ap­pear both no­tice­ably high and ar­bi­trar­ily as­signed, and have been bought by large-scale me­dia con­glom­er­ates be­fore pro­duc­ing a cent in rev­enue.

Yet size­able ac­qui­si­tion num­bers like that of the Face­book-What­sApp deal need to be viewed in re­la­tion to Face­book’s cur­rent busi­ness and the value at­trib­uted to each user. At 450m users, What­sApp’s price tag trans­lates to around $40 per user, the same price that Mi­crosoft paid for Hot­mail in 1998 and cheaper than Twit­ter ($83.53), LinkedIn ($84.95) and Face­book ($141.32), at the time of their re­spec­tive IPOs. As Adrian Sav­ille, CIO and founder of Can­non

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