I Don’t Typically Do This

by Martin Gordon

Why $16B for WhatsApp Isn't Ridiculous

This tweet by Espen Antonsen about Microsoft’s 1997 acquisition of Hotmail got me thinking about acquisition costs per user, so I ran the numbers for other social network acquisitions.

It turns out that Facebook’s purchase of WhatsApp at $35.56/user ($42.22/user if we also include the $3B in RSUs) is in line with average acquisition costs of $35-$40/user.

Bar chart of acquisition costs per user of various web services
Target Acquirer Date Amount ($M) Users (M) Cost / User
Hotmail Microsoft 12/31/97 $400 9 $44.44
Geocities Yahoo 1/28/99 $3,600 19 $189.47
Flickr Yahoo 3/25/05 $25 1.5 $16.67
MySpace News Corp 7/1/05 $580 20 $29.00
Skype eBay 10/1/05 $3,100 50 $62.00
Delicious Yahoo 12/12/05 $15 0.3 $50.00
YouTube Google 10/9/06 $1,650 50 $33.00
Skype Microsoft 10/13/11 $8,500 188 $45.21
Instagram Facebook 4/12/12 $715 30 $23.83
Tumblr Yahoo 5/20/13 $1,100 30 $36.67
WhatsApp Facebook 2/19/14 $16,000 450 $35.56

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