Facebook’s purchase of WhatsApp came as a surprise to many, but not Google or Microsoft, who were both apparently bidding on the company as well as Facebook. While we don’t know the details of exactly how the bidding war went down, we do know the result. The $19 billion purchase price was clearly the result of a bidding war, especially when you consider that Google had offered WhatsApp $1 billion back in April of last year. However, I believe that this probably kicked off the bidding war that ultimately resulted in Facebook winning the war with a bid of $19 billion. Now, while many knew that Google and Facebook had been fighting for WhatsApp, it now appears that Microsoft, logically, was involved as well.
However, Microsoft’s Founder and former CEO and Chairman has indicated to Rolling Stone that not only was Microsoft interested, but that they were willing to buy. Just not for the $19 billion price. Saying regarding Google’s involvement in the bidding, "Microsoft would have been willing to buy it, too.?.?.?.?I don’t know for $19 billion, but the company’s extremely valuable."
Not just that, but he said that the price was higher than he would have expected and that user bases are extremely valuable. He then follows by saying, "It’s software; it can morph into a broad set of things ? once you’re set up communicating with somebody, you’re not just going to do text. You’re going to do photos, you’re going to share documents, you’re going to play games together."
The truth is that Bill Gates is a very wealthy man because he’s very smart and he’s very spot on here. Sure, Microsoft would’ve benefitted from purchasing WhatsApp, but they already have Skype. There is no doubt that Skype needs an overhauling for mobile, but that doesn’t change the fact that Skype has a solid user base and people know Skype as well as they know Microsoft. Realistically, WhatsApp’s value is hyperinflated by Facebook’s own hyperinflated value. Without Facebook’s valuation, a $19 billion purchase is simply impossible because Facebook doesn’t have $19 billion in cash on hand. Not to mention, I simply don’t understand how Facebook can explain to investors how they’ll be able to pay back the initial investment of $19 billion in WhatsApp.
Realistically, this is just another case of Facebook removing another competitor from the space and preventing them from being acquired by a competitor as well. First came Instagram, and for that they paid $1 billion for what was considered outrageous at the time. And then, Facebook dropped the $19 billion WhatsApp bomb on everyone and simply turned the valuation game into a joke. While I’m not convinced that Facebook’s decision to pay $19 billion for WhatsApp was a sound business decision, it was clearly a competitive one in order to prevent their competition from overtaking them. And therein lies one of the problems with having a bunch of enormous corporations, we simply can never have competition because they’ll continually buy out their competitors. And so, we still only really have Facebook, Twitter and Google+.