> Facebook spent $20 billion on WhatsApp and Instagram; Microsoft spent $26 billion on LinkedIn and $7.5 billion on GitHub. Deals such as these were possible only because those acquiring companies were themselves so very profitable.
Instagram had $0 revenue when acquired. WhatsApp had some revenue, but was not profitable IIRC.
>I guess anything makes sense to a company that paid $26 billion USD for LinkedIn.
Is there data to support that this was overvalued? Not personally a big fan of LinkedIn, but it seemed like probably a good long-term buy for Microsoft.
So let's break this down:
A 17-year-old software firm (they are not a startup) has
Has only 125 paying customers
Generates 742MM in revenue
Raised between $2.6 - $3.0 billion dollars in venture capital to generate that $742MM
Has never broken even in 17 years
Lost $580 MM
Concentrates nearly a 1/3 of its revenue in 3 customers (avg rev ~$67MM per those top 3, a staggering amount for a software company of this size)
Grew revenues by 25% YoY, that's good, but 91% of that comes from existing clients, that's bad
Valued at $20 billion by private investors
And the coup de grace, the founders want to keep 49.999% control in perpetuity regardless of their stock ownership.
I expected a lot more given the hype and aura this firm has had for so many years. This company is being valued at 26x its revenue, which is insane even in SaaS land. Good luck to anyone who purchases these shares on the open market. I would highly recommend against it.
>News Corp's acquisition for $500m will probably be remembered as a collossal blunder
Didn't they have a $900 million search deal from Google, though? (Granted, my understanding is they didn't hit their numbers so they made slightly less than that, but still I think this makes it likely that News Corp's acquisition of MySpace was profitable and not a collossal blunder.)
Here's an older TechCrunch article talking about how buying MySpace was one of Murdoch's best decisions ever. (I agree that it looks less good now, but overall I don't think it was horribly bad from a financial perspective): http://techcrunch.com/2008/10/15/three-years-later-buying-my...
> There is no metric by which Whatsapp is worth 19B, except for the fact that Facebook can spend that much money.
But isn't that the most important metric? I would argue there is also no metric by which a Coach purse is worth thousands of dollars but people seem to keep buying them.
> Are they delivering value to society? Yes some, but IMO not nearly in proportion to the amount of wealth they've accrued.
How is this determined? I am trying to see if there is some actionable chain of reasoning here, or if people are just stating the top 5 companies in the public markets qualify? Is it a certain net profit margin? A combination of various factors?
The funny thing is Facebook (or Meta I guess) could fall of the face of the earth tomorrow and humanity would not really be impacted other than temporarily losing WhatsApp groups and having to migrate to a different chat program.
Instagram had $0 revenue when acquired. WhatsApp had some revenue, but was not profitable IIRC.
EDIT: misread the line, above comment rescinded.
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