NEW YORK ( TheStreet) -- Last Wednesday, Feb. 19, I was casually going over some charts and reading the news when I saw headlines cross my Twitter (TWTR) feed that Facebook (FB) had purchased WhatsApp for up to $19 billion.
Immediately, I scoffed and thought, What a mistake this is!
Sure enough, as soon as the news broke, shares of Facebook moved lower in the after-hours. But as time went by, I thought about it more while researching, and started to think it might not be so bad.
Shares have since popped back up to close at $70.78 on Feb. 24, approaching a 52-week high of $71.44 over the trading day.I guess I thought the acquisition was a bad idea, because -- let's be honest -- $19 billion is a ton of money. I also don't use WhatsApp, and don't know a ton of people who do. Some, sure. But not a lot. Then I started to see graphs of this application's stellar growth, which rapidly exceeded that of Facebook or Twitter. WhatsApp's growth has been very, very impressive. And Facebook's management seemed confident that WhatsApp -- which is wildly popular in Asia, India, and other parts of the globe -- would eventually reach 1 billion users. We've already seen Facebook, the social media king, reach that level, but if WhatsApp's growth is any indication, it too will hit the coveted ten-digit user base. And with 450 million monthly users, it's hard to argue with that prediction. Of those 450 million, 70% reportedly use the service every day. So in a way, Facebook is buying eyeballs. At least in the sense that it continues to purchase companies that have rapidly growing user bases that can eventually be monetized. Although Zuckerberg & Co. stated that it does not have any current plans to advertise on the WhatsApp platform, that doesn't mean it will not eventually happen. For two reasons, I want to point out Facebook's $1 billion acquisition of Instagram. At first everyone thought it was stupid. Everyone thought Facebook overpaid on the deal.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV