WhatsApp - Acquired

## Metadata
- Author: **Acquired**
- Full Title: WhatsApp
- Category: #podcasts
- URL: https://share.snipd.com/episode/94139a07-7d44-419d-a59c-59e3525143d1
## Highlights
- The Rise and Fall of Bing
Key takeaways:
• Bran and Jan became good friends while working together at yahoo.
• Bran later rose through the ranks at yahoo, becoming the chief architect of project Panama.
• After becoming CEO of yahoo, Mersom Air talked about Bran and Jan's work on her earnings call.
Transcript:
Speaker 2
Engineering leaders that end up coming out of Yahoo because in a lot of ways, you know, Yahoo was the first. We haven't really covered it enough on this show yet, but it was the first like successful, successful, well, Internet company.
Speaker 1
Yeah. Yeah. Right. Internet directory, basically. It's funny. Yeah. Yeah. You mentioned Chi Lu. So Chi obviously is very notable for his work at Yahoo. I know him as like my mega skip level boss from Microsoft when he ran Bing because Microsoft recruited him over and he ran search for Microsoft and then ultimately actually took over All of office as well. And of course, you know, the relationship between Yahoo and Microsoft, many of our listeners probably know is really long and complicated.
Speaker 2
A topic for another day, but Brian and Jan kind of become kindred spirits when Jan joins Yahoo and Brian really rises through the ranks.
Speaker 3
He ends up becoming the chief architect of Project Panama within Yahoo, which was super, you know, they would talk about it on their earnings calls. I remember Carol Bartson talking about it all the time and then Marissa Mayer after she became CEO and that was ([Time 0:12:34](https://share.snipd.com/snip/96aa11d4-838c-4325-82ac-f0f3ce92a000))
- How messaging changed the startup landscape
Key takeaways:
• Messaging is a powerful tool for building relationships and communicating with others.
• Before product market fit, it is important to have conversations about the goals of the company and the product.
• Once product market fit is achieved, it is important to focus on maintaining that success.
• The main take away from the conversation is that messaging is a powerful tool for building relationships and communicating with others. Before product market fit, it is important to have conversations about the goals of the company and the product. Once product market fit is achieved, it is important to focus on maintaining that success.
Transcript:
Speaker 1
The past week. Interesting. And mail coming in at number two and messages is down probably at like number four. I do probably the most important communication in messages, but I'm in and out of it. I mean, it doesn't have to be the dominant thing taking up the screen most of your time to be the most important thing on your phone.
Speaker 2
That's true. And probably Brian and Jan would totally agree with that.
Speaker 3
It's not about time spent. It's not about it.
Speaker 2
But the most important conversations you're having in a, you know, in a messaging relationship.
Speaker 3
Once they figure this out, you know, Jan then also talks about like before, you know, in sort of the what that 1.0 version when it was just about statuses and away messages, it was just Like Ben, you talk about all the time about the definition of product market fit. It was like you're pushing a boulder up a hill. You know, everything is hard, like getting users to use it is hard, getting engagement. Nobody wants to invest. Nobody wants to work for you.
Speaker 1
This is before product market fit before product market fit.
Speaker 3
And then all of a sudden they have instant product market fit with messaging and everything changes.
Speaker 2
People are adopting like crazy. All of their old Yahoo friends want to come work for them.
Speaker 1
Investors start beating down their doors and literally looking for them in unmarked locations and attempting to network their way to the founders.
Speaker 3
Totally. And we'll get into how that comes together next in just a sec.
Speaker 2
Before they do take money, they do another really smart thing again for them at the time. And I think this might have actually been Brian that kind of came up with this and and advocated for doing it. So they were free. It was a free app in the App Store. But again, remember, think back to 2009 ([Time 0:39:41](https://share.snipd.com/snip/9eb02e8f-fa68-4a31-998a-7125582bf4a9))
- Sequoia Capital's Secret Investment in Whatsapp
Key takeaways:
(* Whats App grew rapidly and became a valuable company due to its strategic value., * Sequoia invested heavily in the company, and it is now worth over one billion dollars.)
Transcript:
Speaker 1
So this happens, and then they're off to the races. By october twenty eleventh, it was early twenty elevent when that round finally closes. By october twenty eleven, whats ap is processing over one billion messages per day. By the next year, august, august twenty twelfth, they grow to ten billion messages per day. That's expedental growth right there. One to ten billion in one year. A few months later, by february twenty thirteentha, whats ap has about two hundred million active users around the world. And at this point, sequoia, in secret, at this point in time, invests another fifty million dollars in the company at a one point five billion dollar valuation for a company that, you know, they're making their one dollar, you know, a year fee that they're only charging in some countries. It's in the u. S, it's in the u. K. I believe it's in some other european countries, but nowhere else around the world are they actually charging for the ap. But tha clearly, the strategic value of this is so high, thats the growth is incredible.
Speaker 2
It's not like any multiple of of net income, you're going any reasonable multiple you're goin to get to one and a half billion dollars. One of the fascinating things here is, you know, sequoia, there's no one that invests between. So the last time sequoia investsed, it was seventy eighty million dollars. They come in two years later with a term for a company that they're already basically the only investor and ar the only institutional. They mark up their own deal, and they're not shy about marking it up and saying, hey, like, we think this thing's worth two hundred million dollars. ([Time 0:51:32](https://share.snipd.com/snip/3e611da7-36b6-48bb-8100-c6c01ad9f2ad))
- The Sundar Pichai Meeting
Key takeaways:
• Mark and Facebook's CEO, Mark Zuckerberg, had been in talks with Sundar Pichai, the CEO of Google, about an acquisition of Facebook.
• Sundar Pichai let two people know about the potential acquisition.
• One was Mark Zuckerberg, and the other was Sundar Pichai's friend and Google employee, Jon Leibowitz.
• On Tuesday, February 11th, 2014, Zuckerberg and Pichai met to discuss the acquisition, and Zuckerberg agreed to sell Facebook to Google.
Transcript:
Speaker 3
We've chronicled, you know, and developed a WeChat and once we chat and QQ before that, and it'll largest social and messaging app in China.
Speaker 2
Apparently 10 cent was ready to do a deal to buy WhatsApp for in the single digit billions, high single digit billions.
Speaker 3
And the deal was pretty far along.
Speaker 2
And Pony Ma, the CEO was scheduled to come over to California to finalize the deal with Jan and Brian and Jim, but he had to have back surgery and had to delay the trip.
Speaker 3
And we're now in February, late January, early February, 2014. During this period of time, I'm sure what's happened, you know, and Jan and Brian and Jim engineered all this, they kind of let it be known to two parties that things might be going on.
Speaker 2
One courses, Mark and Facebook, the other is Google. They had gotten to know Sundar, who at that point in time was running Android, remember, at Google. And they kind of let it be known to Sundar that something might be going on. Sundar gets them a meeting scheduled with Larry Page for Tuesday, February 11, 2014. Somehow, Facebook and Zach find out that this meeting is scheduled and he gets Jan over to his house the Monday night before ([Time 0:56:45](https://share.snipd.com/snip/df94dad2-078c-48cb-9666-bb73d970038f))
- Face Book's Acquisition of Google
Key takeaways:
(* Facebook wants to remain independent., * Google wanted to acquire Facebook, but Facebook refused., * Facebook became a very large holder of Google stock., * Facebook made Mark Zuckerberg a board member of Facebook.)
Transcript:
Speaker 1
And so here's the deal, we wan't t acquire you. It'll be a big number. What's happe is going to remain independent. And now, remember, face book can credibly say this, as we talk o on the show, they are the the poster child for making these leave em alone acquisitions, you know, inste graham being a number one here. And a, it's going to be t two years since mister graham. So there was two, two years since the oracle at this point. And id nat really gone well and and he said, i really want this to be a partnership. So much to ta, most of the will do most of the deal in stock, and you're going to become a very large holder. And face book on you personally. And we will make you a board member a face book, which, as i think, one of six or seven at the time. Ye, and nobody else. The only face book employee board membersre are mark and charrell and everyone else is a outside board member, so this is pretty big. He really, it's unclear if face book knew about ten cents, but they knew about gogle. They really did not want gogle to anquire. Whats a. Jan says, o k, interesting. Thank you very much. The next day, he and brian go down to gogle. They meet with larry page. They talk for an hour, have a nice conversation. A unclear and where'slen? ([Time 0:58:10](https://share.snipd.com/snip/0063a735-d931-43c7-989d-173f3623ede1))
- The Mobile Messaging Wars
Key takeaways:
• Google has launched a new messaging product.
• Googles messaging product is similar to an annual tradition.
• Twitter had a thirty billion dollar market cap at this point.
• Twitter had a very robust advertising business model.
Transcript:
Speaker 3
Google to acquire WhatsApp. Jan says, OK, interesting. Thank you very much. The next day, he and Brian go down to Google. They meet with Larry Page. You know, they talk for an hour. Have a nice conversation.
Speaker 4
Um, unclear.
Speaker 1
And where's Google in their, their, their messaging world right now? Because Google's launched some new form of messenger. I think it's like an annual tradition for them to launch a new messaging product. And so I think at this point, like G chat, I don't think was totally dead, but hang out. So they were trying to double down on it was before duo and some of these new fangled ones, but like you got to remember back at this time, people really felt that, or at least the tech press Was obsessed with writing about the mobile messaging wars. Um, and there are these deep dives on WeChat and China and WhatsApp's crazy growth. And Facebook had acquired Blue Guy, I think, and launched Messenger at this point. And it was, you know, who will win this new? Is this the new app store, you know, is, is messaging sort of the new app? Like now we don't think of Google really as a messaging company, even though, obviously, tons and tons of messages are exchanged on Android all the time. They were very much still in this race for what everyone thought was going to be the next user interface paradigm. Yep. Yep. And failing at it.
Speaker 4
Uh, like I said, annual tradition, I want you to do one.
Speaker 2
In the meantime, Jan and Jim and Brian, they're trying to figure out like, well, what's our number? What's this? What do we think we're worth? And Twitter had gone public recently and ([Time 0:59:29](https://share.snipd.com/snip/85cfd524-4966-4ea2-8857-8c0f5238135b))
- The Takeout Acquisition
Key takeaways:
• Facebook was expecting to take longer to monetize its new acquisition, but was surprised when it was cashflow positive almost immediately.
• Facebook was willing to pay a high price for good will in order to keep the users and assets of the acquired company.
Transcript:
Speaker 3
As a remittances platform for, you know, people use it to communicate.
Speaker 2
With trusted interpersonal relationships between countries, shouldn't it also be, you know, a really great platform for remittances and people have always said cryptocurrencies Are great for remittances. You can avoid all these tariffs.
Speaker 3
That makes sense. But like we all know Libra the master right now. I think they're being sued by the government. I don't know the latest state of it, but seems unlikely that that is going to be a viable business model anytime soon.
Speaker 1
Any time soon is the right thing there. I think there's a variety of things that could still work out for WhatsApp. But the important takeaway listeners is we could not sit on our hands any longer before doing this episode and just keep hearing, wait and see from Facebook on earnings calls. It's not happening in the near future. There might be something interesting. It might be with paying businesses that might even be tools for businesses to promote. I don't know. I'm not being articulate here because I don't actually have a really great thesis around this. But the thing to take away here is it's not going to be very soon.
Speaker 2
Yeah. OK, so I think this is the perfect transition to acquisition category. And this is the place to ask the question again, the US to the top of the show, which is OK. ([Time 1:20:29](https://share.snipd.com/snip/dbba3728-ce79-4689-ba60-43b6fc4a87b8))
- The Importance of Value Creation
Key takeaways:
(* It is worth noting that carriers just figured out a way to bill everyone, and that this does not actually amount to a small savings for them., * Clearly, value capture is not always effective, but it can still be massive in terms of value creation for the world., * And it is also worth noting that being the first platform to implement a platform wide can be a major advantage.)
Transcript:
Speaker 2
Yes, yes. Actually, it's funny. So sometimes we do this section, i'd like to do it to day, on value creation versus value capture, ecause a lot of companies can create a ton of value in the world, but one of the sort of things to do is make sure that you're able to capture some of that value you create. Wats didn't really try, like wats ap created so much value. I mean, and frankly, they destroyed tons of value for carriers.
Speaker 1
But until that able and slightly debatable, i think. O k, i think you're probably right. But jan and bryan got this question all the time, and theyre kind of, and answer that they came up with was, no, no, know, we're actually helping carriers because we're encouraging people to adopt smart funds and move over to data plans, which data plans are more expensive than text plans. And i think its fair, it'sit'. It's a fair argument, but it's flawed in that that was going to happen anyway.
Speaker 2
So it is worth noting too that carriers just figured out a way to bill everyone, like they just repackaged all their theyre they're pricing.
Speaker 1
It's not like they actually material lo e smalles money on this.
Speaker 2
But, like, i don't, i don't consider what's up an effective value capture machine, and still is not, clearly ye or capturi.
Speaker 1
Basically zero value, but massive value creation for the world. And also, again, we dnt talk about this as much, but the end and inscription in being the first platform to implement that platform wide, across everything a, you know, nobody saw that coming in twenty fourteen. ([Time 1:30:14](https://share.snipd.com/snip/1b12881b-e471-421b-815c-289457937929))