Auto ads

Thursday 30 October 2014

GADGET: WhatsApp Lost $230 Million in First Six Months This Year




Facebook FB +0.61% chief Mark Zuckerberg hasn’t been shy about telling investors that, despite paying around $20 billion for WhatsApp, he has no plans to turn the messaging service into a moneymaker any time soon.

Not making money is a diplomatic way of referring to WhatsApp. In a filing Tuesday, Facebook said WhatsApp lost about $230 million in the first half of this year on revenue of about $15 million.

The numbers aren’t necessarily surprising – WhatsApp likely spent much of that money compensating employees — but they are a first reveal. Unlike Facebook, which makes the bulk of its revenue from advertising, WhatsApp offers 99-cent annual subscriptions after a free first year.

On Tuesday, WhatsApp co-founder and CEO Jan Koum said his company scaled back efforts to make money after Facebook acquired the company earlier this year. Before the acquisition, WhatsApp experimented with ways of gathering revenue from its messaging service, such as charging a small annual subscription fee in some countries, Koum said.

“We tried to do that early on because we didn’t have the long-term financial support of Facebook,” Koum added during an interview on stage at the Code Mobile conference in Half Moon Bay, Calif.

With Facebook’s support, WhatsApp can now focus on mainly user growth instead, he said. “Over the next few years our focus will continue to be on growth,” he said. “At some point we’ll get to a billion, two billion users. Revenue is something that… will happen five years from now, maybe later.”

A lot of WhatsApp’s user growth is coming from Brazil, India, Mexico, Russia and Turkey, where more people are getting smartphones and downloading the WhatsApp app, Koum said.

Koum also reiterated his aversion to advertising, saying WhatsApp has no plans to generate revenue from running ads on its messaging service.

Facebook also spelled out in the filing how it valued WhatsApp. Most of the money, about $15.3 billion, went to goodwill, essentially the premium placed on future growth. But Facebook also said it valued the company’s half-a-billion users at roughly $2 billion. That equals about $4 per user. Facebook made about $2.40 per user worldwide in the third quarter, and $7.39 in the U.S. and Canada.

Facebook and other cash-rich tech giants are showing they are willing to take on massive costs to spread into new businesses. Amazon reported its largest-ever loss of $437 million in the third quarter, despite revenue of $21 billion, as it spent heavily on new-product development, music and video licensing. Google GOOGL +1.62% took a hit on its profitfrom spending heavily in new businesses and its own technology to maintain growth. And on Tuesday, Facebook said its profits will be slimmer in the coming months and years as it invests in future technology and hires a wealth of employees from acquisitions such as WhatsApp.

Investors seem to be growing wary of the mounting ambitions. Facebook’s stock fell 10% in after-hours trading on Tuesday. Amazon’s stock dropped precipitously last week after it announced its worst-ever loss.

   

No comments:

Post a Comment

Follow