Numbers first, Facebook has 900+ million active users every month and is valued at around $180 Billion. Whatsapp had 450 Million active users and Facebook picked it for $19 Billion. Just over 10% of market value for almost 50% of users. Good business deal right there. Same thing with Instagram, Facebook was around $100 Billion and has about 350 Million mobile users as opposed to 225 Million users of Instagram. So Facebook picked almost 70% of users for 1% of the market value. Best deal ever!
What is Facebook’s business? advertising, online ads, blah blah! WRONG. They are in the business of connecting people and it’s a pure number game. Facebook has seen that money in the bank or on paper does not mean much if you let competition in any form get bigger. Today it’s Facebook, tomorrow, WhatsApp or Instagram could be the new of communicating.
So when you are designing or developing the products, don’t look for direct competition. Look for alternatives and not having to use any product as a big competition. You will get new perspective on giving that user experience to your customers.
When I was a product manager for a mobile app, I did some calculations by looking at over 50 companies in the FREE business models (where services are free, and companies make money through eye balls), and I had estimated that the average market value per user is $100. It almost approximates to this number when the companies reach their peak. Well most of the time. By this approximation, WhatsApp would be worth at least three times more than what it got paid as it has not reached it’s peak and that it has the potential to grow beyond 1 Billion active users.