Facebook recently acquired WhatsApp for a whopping $19 billion. Anytime a company pays out a big chunk of change to a relative newcomer, the whole tech industry sit up and pays attention. After all, millions of entrepreneurs and iPhone app developers around the world dream about that kind of payday.
A close look at the WhatsApp acquisition shows that there’s a lot more than just the usual suspects of earnings, KPIs and multiples in play here. WhatsApp has a great deal going for it — things that make it extremely attractive to a company like Facebook.
Here are some of the performance features that contributed to the massive WhatsApp valuation:
- Established revenue streams. The WhatsApp business model allowed users to have the app free for one year, then continue to use it for 99 cents per year. Considering there are already 400 million WhatsApp users, the coming year could bring in $400 million or more.
- High revenue per full-time employee. Revenue per full-time employee is one of the most important key performance indicators. WhatsApp has less than 60 full-time employees to go with potential revenues of $400 million, making for about $7.3 million in revenue for each full-time employee. Simply put, that’s spectacular.
- Labor expenditures as a percentage of revenue. In the tech world, a company is in the average range if 60 to 65 percent of its revenues go towards covering labor and employee costs. For WhatsApp, the figure is just 2 percent.
- Enhanced privacy features. The WhatsApp model prioritizes selectivity, allowing users tight control over what is shared, and with whom. That’s a prevailing trend in the current landscape, with the social media boom phase giving way to more wary users.
These impressive performance indicators were major reasons WhatsApp generated such an impressive valuation. For the Houston app developer community, the lessons are clear: concentrating on practical business models that guarantee future revenues at affordable end-use rates is a winning formula.