Acquired

Ben Gilbert and David Rosenthal

Venturecapital, Ma, Investing, Acquisitions, Startups, Vc, Investment, Business, Technology

4.8 • 2.9K Ratings

🗓️ 29 January 2020

⏱️ 110 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

We kick off Season 6 with a long-awaited Acquired Classic: Facebook’s $22B purchase of WhatsApp in 2014, which still ranks as the largest acquisition of a private VC-backed startup in history. Yet despite that enormous pricetag and all its associated fanfare, as we sit here 5+ years later WhatsApp actually generates LESS revenue than the meager ~$20m it was bringing in at the time of acquisition. Was this this worst acquisition of all-time, or a brilliant strategic chess move by Mark Zuckerberg & co? Tune in as we render Acquired’s judgement!

Note: Unfortunately David’s audio quality in this episode was impacted by a technical glitch which we didn’t discover until after recording. Our editors worked super hard to fix in post-production, but it’s still not totally perfect. We hope you’ll give it a listen regardless, and we’re working on getting a transcript made ASAP, which we’ll post to the website when it’s ready. Thanks for bearing with us,

-Ben & David

Sponsors:
Vanta: https://bit.ly/acquiredvanta

Statsig: bit.ly/statsigacquired
Modern Treasury: https://bit.ly/acquiredmoderntreasury

Carve Outs:

Ben: Computer glasses: https://www.amazon.com/s?k=computer+glasses
David: Reebok Floatrides: https://www.amazon.com/Reebok-Forever-Floatride-Energy-Black/dp/B07NYBRQ96/

Sources:

Transcript

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0:00.0	I do have to say that based on all the other companies we analyze I was expecting to see gross margin
0:05.1	highlighted in their financials and talked about in the presentation but Facebook's actual
0:09.6	operating margin is so good that that is what shows up everywhere because they actually make
0:13.7	money and they make a ton of it. It's like a dramatic departure from a lot of the
0:17.8	episodes we've done in the last year. That's that's insane. I mean the fun the way to like think about that status like for every dollar they bring in house they keep 45 cents even after paying for everything all their fixed costs all their employees. It just a cash machine and that's why it's a 630
0:36.3	billion dollar market cap company.
0:39.3	Yep. Welcome to Season 6 episode 1 of acquired the podcast about great technology companies and the stories behind them.
0:57.0	I'm Ben Gilbert. I'm David Rosenthal and we are your hosts.
1:02.0	Today we are talking about WhatsApp,
1:04.0	an app that Facebook paid $22 billion for
1:07.0	and has done virtually nothing in the six years since.
1:11.0	And in fact, it was reported last week, they are, that's right David, abandoning near-term efforts to enable advertising in WhatsApp, which of course is Facebook's core business model.
1:21.0	You said 22 billion, right?
1:25.0	Billion. Just to make sure we're on the same page.
1:27.0	Yeah.
1:28.0	That's 22 Instagram's right there.
1:30.6	So today we will decide, was this one of the worst acquisitions of all time or did
1:35.2	Facebook make a genius move even for this insanely, insanely high cost?
1:39.8	I'm super looking forward both to telling this story because it's an amazing story but also to
1:45.2	debating that question because you know I think they're really good arguments to be made on both
1:50.1	sides. This is as classic as a classic acquired episode gets. We have more
1:54.3	than five years of hindsight. We've got a big price tag. We had lots of
	...

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