Facebook and Whatsapp Business Strategies Comparison Assignment -
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Case Study Facebook's (FB) $19 billion acquisition of Whatsapp (WA) in early 2014.
Please research and distill your thoughts and specific answers the key issues below-
Key Case Issues:
1) What is Whatsapp's (WA) business model, what is its strategy?
2) What is Facebook's (FB) business model, what is its strategy?
3) a) How does FB's business model differ from WA's?
b) How does acquiring WA fit into FB's strategy?
c) How does acquiring WA impact FB's business model?
4) Do you think FB's acquisition of WA for $19B was financially justified at the time of doing the deal.
5) FB outbid Google for this deal, is that a) systematically predictable ...or b) was it a mere random, once off circumstance... or c) perhaps is it an indication of the "winners curse" for FB?
Answer - Facebook and Whatsapp Business Strategies Comparison
Plan of action of WhatsApp. It is a cross stage for information app which is used to have a membership charge for its clients in a yearly course. The organization has expanded its business usefulness by propelling its first income gaining item which is WhatsApp Business API. This new item will give the organizations a chance to coordinate WhatsApp for Business APIs with their frameworks and connect with clients through warnings and manage their inquiries. WhatsApp under this model has around 700 million clients around the world; yearly income assesses at $700 million every year as of now. There ought to be an expanding market entrance which will make the application the first app for the client base to develop widely (Cirjevskis, 2015).
According to Carter (2013). The Facebook business model is a vast dark gap of client information where that information is in a confined way to advertisers brings forth a massive income worth more than $100 billion. Facebook has intended to create income from its capacity in the promotions. It can be in its financial specialists' pitch deck.
What is the distinction between Facebook and WhatsApp?
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Facebook applies a situation of a person to person communication stage that associates you to individuals utilizing it while WhatsApp is a texting application that uses the information to trade content or sight and sound messages to those who are utilizing it.
Facebook application is more information expanding whereas WhatsApp devours lesser information unlike with Facebook.
Facebook gives someone a chance to transfer pictures, recordings, and so on that's means every data you want to give out while on WhatsApp you can't move photographs or share anyone's photos.
Hashtags take a shot at Facebook. Hashtags don't deal with WhatsApp.
You can make pages on Facebook. You can't make a page on WhatsApp.
Facebook is accessible as an application and on location While WhatsApp requires an application.
Facebook's obtaining system focusses on the acquirement of new ability, securing of new advances, and purchasing out the challengers. WhatsApp assumes a critical job in the global regions which is significant to Facebook development. By putting adaptation endeavors on hold, Facebook is concentrating on the fate of universal, cross-stage interchanges (Walther et al., 2008). Through the securing of WhatsApp, the appendages of Facebook are nearer to achieving billions of individuals, and with a market of that estimate, Facebook is sure to figure out an inevitable cash flow
During 2014 WhatsApp was nearly making the same number of messages as of the whole telecom industry. It had 450million clients with 70% who were active day by day, which is as of now 60% for the extent of Facebook's everyday client network (550million.). By carrying these individuals into the Facebook corporate family, it guaranteed Facebook for proceeded pertinence of the market if it shifts. The issue is that it keeps Facebook applicable, instead of losing significance to its contender.
At 2013 Facebook purchased WhatsApp for $19 billion appeared a paralyzed move as that was stunning add up to pay for an organization with the evaluated income of just $20 million to a practically 10% of Facebook's general populace just only for "information application."
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For $19 billion incentive for an organization in value advertised today, you would require that organization to create about $1.5 billion in after-charge pay in the unfaltering state (Choffray, 2017).
Estimation of value = $19 billion
stocks on 1/1/14 = 8.00% (a 5% value hazard premium over a 3% chance free rate)
Unfaltering state income important to legitimize esteem = $ 19 billion *.08 = $1.52 billion
Consistent state pre-charge income expected to legitimize populace, utilizing a viable assessment rate of 30%= $1.52 billion/ (1-.30) = $2.17 billion
Utilizing a 10% required return (mirroring the higher hazard) and working in a holding up time of 5 years before the pay gets conveyed expands the equal the initial investment salary to $4.371 billion. Hence the expected return rate was much lower than what it was in for investment (working capital).
For the Facebook/WhatsApp bargain, led me in thinking that Facebook is perceiving in a market that rewards you for having a more prominent number of progressively included clients, they pursued WhatsApp that conveys on the two measurements. Facebook is as of now being esteemed at $170 billion, at about $130/client, given their current client base of 1.25 billion (Choffray, 2017).
On the off-chance WhatsApp is obtaining the expands for client base by 160 million (I realize that WhatsApp has 450 million clients, however since its income alternatives are constrained as an independent application, the incentive here is in gradual Facebook clients), and the market keeps on evaluating in every client at $130 creating an expansion of market estimation of $20.8 billion, higher than the cost paid.
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