To me, it’s pretty simple. Facebook is taking out an option on the future. And, in my view, it’s a pretty cheap option to boot. In some ways, it’s not unlike the deal the Los Angeles Angels (of Anaheim or whatever) just signed with Mike Trout.1
Yes, $2 billion is a lot of money. But it’s also roughly 1/8th of what Facebook just spent on WhatsApp. And it’s roughly 2x what the company spent on Instagram — and that has turned out pretty well so far. One of the better deals this decade, perhaps.2
To me, the most exciting part of the Facebook/WhatsApp deal has nothing to do with the deal itself. Instead, I’m excited about the ramifications of such a deal. And I’m not talking about Facebook or WhatsApp here either. History will ultimately prove that deal genius or folly. But more importantly, I know that a deal like this has other people talking, thinking, and building.
The last group is key, but let me start with the first group. Once the fervor around the deal itself died down, we got a couple of compelling posts from the likes of Benedict Evans and riffing on it, John Lilly. Incidentally, both are now VCs. But neither started out that way, and both have long histories of solid thinking and writing.
Both understand that the Facebook/WhatsApp deal is simply the strongest signal yet that we’ve fully entered a new age in the world of computing where mobile is now the kingdom. And the $19 billion price tag simply shows that there isn’t yet a king.
This morning I had a meeting with a couple entrepreneurs whose company was recently acquired. It was just a general catch up session, no real agenda. Still, it seemed quite random when a good third of our conversation was spent talking about WhatsApp and its incredible penetration in India.
Why was this growth happening? The consensus was: focus. On what they’re good at. On what their users want. On what ultimately matters.
A couple hours later, what at the time seemed a random conversation turned almost a little spooky when it was announced that Facebook would be acquiring WhatsApp for $19 billion and change.
I’m not going to spend time breaking down this extraordinary deal as I know no more about it than what I’ve read. But what I do find fascinating is what’s becoming clear from those closest to the company: in an age of pomp and circumstance around all things startups, the team behind WhatsApp was all about keeping their heads down, focusing on product, and avoiding bullshit at all costs.
When talking to entrepreneurs at the very early stages of their companies, I’ve noticed that there’s a tendency to give a fairly long product roadmap. “And then we’ll add this. And then this. And then this.” That type of thing.
And I think that’s fine; it’s good to be thinking ahead, and it’s even better to have a vision for where you want the product to go. But it’s just as important to be realistic. And the likelihood of things going exactly to plan from day one is basically zero.
But that’s all obvious. What may not be so obvious is what happens when a product actually hits, takes off, and establishes itself. Because it feels like there’s a trend emerging here, at least in the world of apps, that is worth noting.