Facebook paid a huge sum on WhatsApp and it may not pay off
Facebook may have shelled out $19 billion on WhatsApp yesterday, but there’s little hope for an investment return anytime soon.According to NYU Professor Aswath Damodaran’s blog post, WhatsApp would need 2.5 billion new users to make enough money for Facebook to break even.
The finance professor’s reasoning takes into consideration the current 450 million users and the fact that the app is free for the first year before asking less than $1 per year for users (or less if the subscription is lengthier).
Under these circumstances, Facebook needs to focus on users because the numbers are quite impressive.
Alternatively, Facebook could make money from this investment by increasing the yearly subscription for WhatsApp or adding advertising.
Facebook’s Mark Zuckerberg has already stated that he has no intention of inserting ads into this messaging app. Also, he has mentioned that he believes that WhatsApp is heading for the magic user number – 1 billion.
That leaves the increased yearly subscription, which wouldn’t be too bad considering how low it already is, but considering the number of free apps out there offering basically the same service, it may not pay off.