If Line Is Worth Over $8 Billion, Here's What Facebook’s Messaging Apps Could Be Worth

The valuation being granted to Line in its Thursday IPO suggest just how valuable Facebook Messenger and WhatsApp could be if monetized well.
By Eric Jhonsa ,

Following a strong IPO, Asian mobile messaging app owner Line (LN) - Get Report is worth over $8.6 billion. That represents a valuation of more than 8x Line's 2015 revenue of $1.07 billion, and nearly $40 for each of the 218 million monthly active users (MAUs) Line claimed as of March.

Facebook (FB) - Get Report, owner of the world's two largest mobile messaging platforms, has to be smiling at the sight of such numbers. Especially since they're being given to a rival whose growth has slowed considerably.

Facebook Messenger hit 900 million MAUs in April, a 50% increase from the 600 million claimed as of March 2015. WhatsApp, which Facebook bought for nearly $22 billion in 2014, announced in early February it had topped 1 billion MAUs, up from 700 million in January 2015.

By contrast, Line's MAUs were up only 6% annually in March, as competition from Messenger and WhatsApp stunted user growth outside of Line's core markets of Japan, Taiwan, Thailand and Indonesia.

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If Messenger and WhatsApp were valued at $40 per MAU, they'd be worth more than $76 billion to Facebook collectively. That said, such a valuation estimate might be excessive for at least two reasons:

    A decent portion of Messenger and especially WhatsApp's user bases reside in emerging markets that can be relatively tough to monetize. Line's base, by contrast, skews heavily towards three affluent markets (Japan, South Korea and Taiwan) and one middle-income market (Thailand).

    Line has already proven it can successfully monetize its apps via ads, games, stickers and e-commerce services. Facebook still has to prove it can do the same for Messenger and WhatsApp. And aggressively monetizing WhatsApp could prove a challenge, given the app has long pitched itself as a simple, no-frills messaging platform that can act as an SMS replacement.

    At the same time, Messenger and WhatsApp are still growing much faster than Line in spite of their larger user bases, and markets tend to grant a valuation premium to industry leaders. It's also hard to doubt Facebook's ability to monetize Messenger and WhatsApp once it makes doing so a priority, considering the tremendous success it has had making money off its core app, and more recently, Instagram.

    Facebook recently began testing its first Messenger-related ads; they involve "Sponsored Messages" from businesses to users who have already engaged with them, as well as "Click to Message" news feed ads that urge users to engage with a business. There are also opportunities for Facebook to monetize its just-launched Messenger chatbot platform, such as by letting businesses promote their chatbots and handling payments for chatbot-driven transactions.

    With Messenger now supporting Facebook's Instant Articles, there's also a chance for Facebook to sell ads against articles appearing within Messenger, provided publishers don't choose to sell the ads themselves.

    WhatsApp, meanwhile, plans to begin testing tools that let businesses provide services to consumers through its platform. It remains tight-lipped for now about how businesses will be charged.

    Given their market leadership, high daily usage rates and continued growth, as well as Facebook's clear interest in monetizing them, a valuation of, say, $25 per MAU for Messenger and WhatsApp might not be so far-fetched. That would still collectively value the apps at $47.5 billion. At $30 per MAU, the figure goes up to $57 billion.

    While one can argue about the specific multiples Messenger and WhatsApp deserve -- it's certainly hard to come up with precise numbers at this point in their development -- they're clearly highly valuable assets even for a company of Facebook's size. The valuation just granted to Line only helps to reinforce this.

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