WhatsApp with Facebook? Smart move Zuckerberg?

Facebook Pays $19 Billion for WhatsApp

Facebook bought Instagram for $1 Billion in 2012, and now they are buying WhatsApp for $16 Billion, sort of. The total as I understand is an initial $12 Billion in stock and $4 Billion in cash, then $3 Billion that vests over 4 years. So that is $19 Billion in total.

For those of you that do not use WhatsApp, here is how the now $16 Billion dollar acquired company describes their service:

whatsapp logo

How it works…WhatsApp Messenger is a cross-platform mobile messaging app which allows you to exchange messages without having to pay for SMS. WhatsApp Messenger is available for iPhone, BlackBerry, Android, Windows Phone and Nokia and yes, those phones can all message each other! Because WhatsApp Messenger uses the same internet data plan that you use for email and web browsing, there is no cost to message and stay in touch with your friends. In addition to basic messaging WhatsApp users can create groups, send each other unlimited images, video and audio media messages.

Is Mr. Zuckerberg Crazy?
Maybe, maybe not. Let’s look at some of the knowns. He has to maintain market leadership. His stock has done well lately and one could argue it is in large part due to their mobile revenue. If that is the case and mobile growth as well as market leadership are two of their many goals, then WhatsApp may have been a bargain. Here are some WhatsApp numbers, 450 million active monthly users of which 70% are active on any given day. Wow. Here are some Facebook numbers from September 2013, 1.19 billion active monthly users and 728 million daily active users. In comparison form:

1.19 : Billion Active Monthly Users
728 : Million Active Daily Users
$171 : Billion Market Cap as of today 2/20/14
$143 : Value of Each Active Monthly User
$234 : Value of Each Active Daily User

450 : Million Active Monthly Users
315 : Million Active Daily Users
$16 Billion : Sold ($19 Billion including the $3 Billion vesting for 4 years)
$35 : Value of Each Active Monthly User
$50 : Value of Each Active Daily User



Note on User Value Calculations: there are other factors to take into account, such as a big one – Revenue. However it gives a rough comparison of value based solely on active users.

What is the Prince Lawsuit Really About and Why is it Relevant

There seems to be a little confusion about who Prince Rogers Nelson (“Prince” the singer) is suing and why. I have seen multiple articles entitled “Prince sues Facebook users” which leads you to believe that he is suing people because they are Facebook users, which is not the case. Sorry if my take on it is boring, as a lawyer that has a comp sci degree who used to practice intellectual property law – I love this stuff.

prince complaintYou can read the entire complaint here on scribd in which he has filed a complaint against 22 individuals. A couple things to note, the plaintiff is indeed Prince and there are two individuals named as defendants and 20 others named using their online names. Prince is doing business as Controversy Music and has over 600 copyright registrations. In other words he has intellectual property which are assets like any other type of property. So he hates Facebook users and is suing Facebook users right? Wrong. He is going after 22 individuals that he believes engaged in infringing on his intellectual property rights. Here is where it gets interesting and why this could be a ground breaking case that may change the online behaviour of many individuals, depending on how this case is decided.

What Are the Individuals Being Sued For?
Here is why I find it so interesting. These individuals are not being sued for making copies of his works, in other words copying his songs, but instead are being sued for linking to the songs. The defendants posted the links on Facebook pages and Blogger pages. So the link to Facebook is simply that the users posted links on some Facebook pages. These links pointed to file sharing services that have the individual songs.

Claims against Each Individual
The complaint goes on to discuss what Prince believes each individual did.

All of these individuals are accused of posting links that directed others to where the file was to a Prince copyrighted work on a file sharing service.

In the claims against each individual it does not state they were direct copyright infringers, in other words made copies of the songs and distributed. However they do claim in general that all Defendants have reproduced and distributed copies of the songs, but they do not point to any one individual. That is what is confusing, since it seems as if they are looking for a charge of contributory infringement or direct infringement from a link to a songs source even if they have not had any control over the song or the source.

Damages of $1 Million Each?
Prince is asking for all the damages he can obtain under law. The $1 Million that is being reported on is a statutory amount since he registered his copyrights federally. He is also seeking other damages including but not limited to profits.

Why is this so Interesting? Why You May Want to Be Careful

It is possible that some of these defendants may be guilty of putting links on their blogs to songs on a file sharing service and found guilty of copyright infringement but have not actually made copies, or reproduced, the actual songs. Here is part of the claim that is most interesting:

prince sues

“When Defendants posted the infringing and bootlegged material to their blogs and Facebook accounts, they knew that the users of those blogs and accounts would download such material in violation of Prince’s rights.”

What does this mean for you? If these individuals are found guilty of copyright infringement by placing a link on their web page that points to copyrighted material, knowing it is copyrighted material, then you better:

Be careful what you link to.

Cyber Monday sets a New Record : 2010 to 2013 Compared

cyber-monday-2013-1735-billionWith regard to spending from a desktop computer, as reported by Comscore, Cyber Monday 2013 reached total sales of $1.735 Billion. That is an increase of 18% over last years Cyber Monday of $1.465 billion. There are many factors that could effect the total sales of any one day however it is still an impressive comparison. In the report they noted that some retailers are providing the Monday deals earlier and later and therefore Monday could of been larger.

The real issue here is that this particular day has been watched because it was the first day back from work after the Thanksgiving weekend. In the past computer connections were faster at work and therefore more people spent from their computer at work. Now days your home connection is just as fast as work, if not faster. However the days sales total is still tracked.

This year Cyber Monday 2013 was not only an improvement over last year but was actually the biggest spending day in history.

I took the chart with 2012 and 2013 numbers and compared it to the chart with 2010 and 2011 numbers, with respect to Cyber Monday. See below.


Cyber Monday Sales by Year

  • 2010 : $1.028 Billion
  • 2011 : $1.251 Billion
  • 2012 : $1.465 Billion
  • 2013 : $1.735 Billion

It was just a couple years ago that sales totaled just over $1 billion. Now we are almost topping $2 Billion, and these numbers are United States retailers only. It actually excludes travel purchases.

See the full Comscore report for Cyber Monday 2013 here.

My Memo to Snapchat – You Are Making a Huge Mistake

What is going on these days? Every time I turn around another company is either not making any money at all or they are operating at a loss and worth a Billion dollars or Billions of dollars? Snapchat was offered $3 Billion?

without billionsHere is my memo to the founders of Snapchat and I also want to share with them my rule. As someone who almost sold for millions of dollars right before the first internet bubble and market crash only to see our negotiations stop when the market did crash and our potential acquirer lost 80% of their value, here is my rule. This rule particularly applies to those who have companies with 0 revenue, that’s zero revenue. At the time I did have revenue but the rule I came up with after that near millionaire miss is simply this:

“If anyone ever offers you money for anything … take it”
– Brian’s Startup Rule

Also as a founder, never forget this:

“Your Investors have invested in multiple companies, if you hit it big they are happy, if you miss and go bankrupt it does not effect them as it effects you. They have other horses in the race, you do not.”
- Common sense

$3 Billion Offer
Apparently the company Snapchat was offered $3 Billion by Facebook. Here is an excellent article by Matthew Klein at Bloomberg about the offer. When it comes to company valuations I know that often times the “value” of the company is just a shot in the dark, there are formulas to multiply earnings, or value a company based on a dollar value for each user, and many others, such as the active users and possibly total “snaps” that occur which is very impressive and they say is at 350 million snaps a day.

My Memo to Snapchat

Snapchat Founders,

I am going to make three assumptions based on what I have read. First, I assume you have a decent amount of stock. Second, you make $0 in revenue. Third, I assume Facebook did indeed offer you $3 Billion. If my assumptions are correct then I can only come to one conclusion, you are making a huge mistake. A billion dollars for a feature? Wakeup, Facebook is not paying you $3 billion dollars because you are worth $3 billion dollars. Facebook is stuck in the public market game where they need to keep their key metrics moving up and to the right.

Could they take a billion dollars, hire a bunch of people, sit them in a building and build Snapface? Of course they could, and a lot cheaper than they are paying you. So why don’t they? Because they have to meet their quarterly numbers and it is faster to just buy you then build. Their numbers among younger users appear to be decreasing, by purchasing you they immediately have a segment of the younger market that they need. Again – they have no choice but to acquire due to public market expectations – you are not worth billions of dollars at this point. That does not mean you will not come up with an amazing advertising model, subscription model, or in app purchases, that generates 100’s of millions of annualized revenue, but that remains to be seen. Because eventually you will need that to justify a forward looking valuation in the billions of dollars.

What Are the Options? There are two options: to sell now or not to sell now. If you sell you get $3 Billion. The other option is to not take the money and achieve one of three outcomes: (1) grow the company, go public and have a valuation of over $3 Billion [around what Twitter (NYSE:TWTR) is at this time, and twitter has revenue], (2) you end up staying private and selling later for $3 Billion or more; (3) for some reason, either your mistakes or competition, you sell for less than $3 Billion. So you can take $3 Billion now or take your chances.

What if you are too big to buy? Let us assume you do a next raise of $225 million on $3.8 Billion like pinterest did and this article seems to infer you might also do. That means that the current investors need you to sell for significantly more that $3.8 Billion for them to make money. There is a valuation that eventually is too high for anyone to purchase you, you may take investment and need such a high valuation that you have no choice but to keep going on your own. Of course you could sell for less and those investors, the next round of gamblers, lose some money. But it is a real risk that you end up being too big to buy.

What if the Founders Have No Choice? It is possible that due to the prior rounds of funding, the founders do not have the power to sell the company. The power may be completely in the hands of the investors. In that case, my apologies to the founders, you are in a pickle. It is not uncommon.

Take my ramblings as those from someone who failed and did not sell my first online company for millions at the time. So you could write off my opinion as an opinion from someone who failed and therefore is useless, or you could ponder my opinion because sometimes the best lessons learned are from failure.

Good luck,

PS: By the way, my business partner Chris pointed out that the main feature of photos becoming deleted so only the receiver can view them does not seem to work or not be as private as users are lead to believe. I only say that based on this article: How to save a Snapchat. That could be a big valuation problem, or not, what do I know.

Here are the Top Online Coupon Sites

top coupon sitesWhat are the top coupon sites online? What I believe to be the three top coupon sites are listed below. I also discuss the characteristics of a good coupon site and discuss the differences with deal sites.

First of all, what makes a coupon site worth using?
I would submit that there are various factors. Ease of use is definitely one of them. In other words are you able to find exactly what you are looking for, easily and quickly. Or are you distracted by too much going on and have a hard time finding what you want? If you are able to easily find what you need then kudos you have passed round one.

Pages tailored to your search for a coupon? Is the page you are looking at, that is suppose to provide you with a coupon, actually giving you a coupon. The deals should be listed and they should show you the coupon itself. Be wary of those that force you to click a link, or hide the coupon code so you must click the link. Yes these sites make money off of affiliate deals when someone purchases however they should not steer you into clicking a link.

Do people like it? A good site will allow social interaction. There should be the ability for anyone to easily leave a comment, read comments, and engage in the discussion. Also a voting capability is necessary. Everyone should have a chance to vote on whether a deal is good or not. Sometimes a vote down is not for the deal itself being bad but possibly the deal has ended either because the last day of redemption has passed or because there was a limitation on the number of redemptions. It is critical to use the social community of users like you and I to allow for feedback or we would never have the most up to date information. When there are literally tens of thousands of stores it can only be updated if consumers provide feedback.

Is it free? They should be, and the best deal sites are free. Why should they be free? It is because of their business model. The model is primarily transactional based. This means that they are paid, or generate revenue, when they send a person to the retailers site and that individual ultimately purchases something. There are other forms of advertising revenue however that is the lion share of it.

So what are the best coupon sites?
There are three coupon sites that I consider to be the best: Retailmenot.com, CouponSwapper.com, and FatWallet.com. Each of these has characteristics of a good coupon site. To get an idea of what each coupon page looks like, you can see a GoDaddy coupon page here at CouponSwapper, RetailMeNot, and FatWallet. You can compare the layout of each.

What About All the Rest of the Coupon or Deal Sites?
There are many deal sites out there, particularly those like Groupon. These have an entirely different business model. Their idea is to find deals and send out to their user base. Therefore these may or may not be things you are looking for. That is different from a site that has deals from various retailers and allows you to find what you need. The Groupon idea was that advertisers, the retailers, would be willing to give a discount but usually only for a limited number of purchases or for a limited time. There are similar to Groupon such as Zulily which has deals but in a specific niche which is mother and child related.

* Full disclosure: I am involved with CouponSwapper.