The Economics of the Madhouse

Generali

Sorry, did I say madhouse? I meant this is the dot com economy in action:

http://www.bloombergview.com/articles/2014-10-28/whatsapp-gets-a-warm-welcome-into-facebook

Facebook paid $19,000,000,000 for WhatsApp. For that they received $10,000,000 in revenues and a hundred and some-odd million of losses.

Someone did well out of the deal. I don't think it was Facebook. BTW, it's interesting to note that as a WhatsApp user (if you are) you are worth 50c in revenue per year to Facebook.

purch

It is genius.

Businesses that offer their product to consumers for nothing, yet make billions.

chewmylegoff

The article says that whatsapp costs 99 cents a year. I thought it was free...

Delete.

antrobus

purch wrote: »

It is genius.

Businesses that offer their product to consumers for nothing, yet make billions.

You mean like MoneySavingExpert.com?

P.S. Okay, maybe it's only 'millions' rather than 'billions', but what's a few zeros between friends?

antrobus

chewmylegoff wrote: »

The article says that whatsapp costs 99 cents a year. I thought it was free...

Delete.

It's free to download and try for the first year, then it's 99 cents a year.

Of course, I had to look that up. I had no idea what WhatsApp was before. But then I don't really do mobile phones, and I have no idea about any of this smartphone malarkey. After all, I'm only just beginning to get the hang of this mouse thing, and I miss the days of the DOS command prompt.

michaels

I would say what is the average customer acquisition cost for facebook?...but then I suspect lots of whats app users already have facebook accounts.

I don't suppose the whats app software would cost more than a few million dollars to develop. This leaves perhaps they hold a very valuable patent?

KrytenIceCubeHead

This is Facebook.

https://www.youtube.com/watch?v=kFKHaFJzUb4

Generali

michaels wrote: »

I would say what is the average customer acquisition cost for facebook?...but then I suspect lots of whats app users already have facebook accounts.

I don't suppose the whats app software would cost more than a few million dollars to develop. This leaves perhaps they hold a very valuable patent?

TBH I have always thought that the WhatsApp acquisition was always about taking out a competitor rather than buying an ongoing business.

I suspect the rationale is that once every few years a social website will come along that a new generation will embrace, largely because teenagers don't want to hang out with Dad and Granny. Facebook will need to recognise that next company and buy it up.

Of course, at some point a generation will collectively decide that social media is a waste of time and space and go out to do stuff instead. That's why almost every tech company is a raging short in the end. Apple will produce the iCrap X at some point; The Cloud will turn out to be a security nightmare, the gun control equivalent of keeping all the guns at the gun club. Look at Nokia for further details for how all* tech companies end up.


*Almost all.

KrytenIceCubeHead

Facebook is always asking me to take part in seemingly innocuous and inane 'surveys' such as 'How much do you like your nose?'. Of course the answers are being filtered off to a vast database where your nasal preferences are sold on to companies dealing in beak enhancement products, which explains why my Inbox is full of offers to buy snout botox.

See you on Facebook. (tm somegreybloke)

Generali

purch wrote: »

It is genius.

Businesses that offer their product to consumers for nothing, yet make billions.

It's like the ITV model only even better as Facebook doesn't even produce any content, the users even do that for them.

Bantex_2

If you are not paying for the product, you are the product.