Facebook’s decision last week to shell out $19 billion to buy WhatsApp has stunned Silicon Valley, Wall Street and dweebs everywhere. Nobody can seem to make much sense out of it, despite Facebook’s explanations.
First things first: Somehow, the deal was kept quiet, a tribute to Facebook CEO Mark Zuckerberg and his bankers. Usually, word would slip out in advance and the Facebook stock would start doing gymnastics in advance.
The price seems exorbitant. The $19 billion price tag automatically lifts Facebook into the annals of companies doing the biggest deals around, a startling development for a company that had seemed to epitomize the ranks of pesky up and comers — not behemoths.
A simple explanation is to say that Facebook is building a stable of promising brands http://adage.com/article/digitalnext/facebook-buys-whatsapp-facebook-house-brands/291798/?curator=Me…
Facebook is trying hard to stay relevant over the long haul. WhatsApp is a star in the messaging world. Facebook needs to forge this kind of a connection. Its $1 billion acquisition of Instagram — 1/19 the size of this one! — was intended to make Facebook more conspicuous among young computer users.
Clearly Zuckerberg & Co. are worried that they have lost, perhaps forever, the key demographic: teenagers. Ironically, Facebook was crated on a college campus, Harvard, and it appealed to young adults.
Now, a decade later, it is an older generation — middle-aged parents, no less — which loves Facebook. Young folks have moved on to SnapChat and the rest of them. Facebook is desperate to do anything to reach the kids.
What also makes an impression on me is that Facebook is all grown up. It is perfectly willing to join the Big Boys and way overspend on an acquisition, its short-term stock market prospects be damned.
Zuckerberg has become a statesman with this deal. He can no longer be regarded as a kid, even though he won’t turn 30 himself until May. He has made a statement by doing this transaction, whether it proves its value or not.
You may want to utter “WTF” about Facebook, spending so lavishly on a deal.It almost looks like Facebook — despite the rumors that Google was looking to jump in with a $10-billion offer forWhatsApp — was bidding against itself, as baseball teams sometimes do when they want to secure a sketchy but well known free agent. It’s hard to get away from the conclusion that Facebook grossly overpaid to own this property.
Was it a case of Mark Zuckerberg’s ego working overtime? After all, lots of really big deals occurred to satisfy the ego of the CEO.
Facebook is all grown up. It knows now that it it is easier and wiser to buy than to build. WTF, indeed.