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This is meant do to one thing -- let the founders retain control while allowing for large stock acquisitions. It's possible Google was muscled out of the Whatsa

This is meant do to one thing -- let the founders retain control while allowing for large stock acquisitions. It's possible Google was muscled out of the Whatsapp deal simply because they couldn't pony up the money. $20B is almost half of their cash on hand. Note that the Nest and Waze acquisitions (small in comparison) were paid for almost entirely in cash.

sillysaurus3 12y ago
Did FB pay $19B for Whatsapp in order to prevent Google from acquiring their userbase? That is, FB got into a bidding war with Google over Whatsapp?
- nyrina 12y ago
  It could certainly be a large factor in the massive price. $19B is a whole lot of money, even (especially?) for a company the size of WhatsApp
  - eitland 12y ago
    Interestingly the size of WhatsApp (the team and the required hardware) compared to its userbase might actually be one of the reasons why the price went so high. In other words, - they had a very good engineer to end user ratio.
    - matthewmacleod 12y ago
      I don't think so. They'd obviously built a stable platform, but it's not anything that Facebook couldn't have recreated with far less investment.
      - jbrooksuk 12y ago
        Then they probably spent so much to acquire the user base.
    - alandarev 12y ago
      Oh please, the companies are being bought out not because of some engineering masterpiece, but for already checked and working idea + loyal userbase.
      - lallysingh 12y ago
        I think the parent meant that in terms of a technical cost to user count ratio.
muyuu 12y ago
Why would Google be required to pay cash when Facebook wasn't?
- matthewmacleod 12y ago
  That's the point of this change - Google weren't required to pay cash, but given their limited ability to offer stock deals without dilution of the founders' voting rights, it was probably not possible to offer stock.
  - gcb0 12y ago
    This is nonsense. If they could have offered x billions in y shares, what change now? Will people accept offers for x billions in 2y shares? It makes zero sense!
    - Jacqued 12y ago
      The new shares issued here have stricly no voting rights. So they can offer them in any quantity without having to worry about diluting their voting rights. Whereas offering 19B in voting shares (even though I'd imagine class A shares have less rights than class B) might have been enough to dilute Brin and Page's voting rights significantly.
      - gcb0 12y ago
        makes sense now. thanks. but then, wouldn't the non-controlling shares be deemed worthless in the long run and it's price plummet in comparison to the controlling shares? Any other big company did that before?
moe 12y ago
Muscled? I mean... not to rain on anyone's parade. Perhaps someone just came to their senses? 19 billion dollars, for a messenger app, is more than just a little bit ridiculous. It's the kind of ridiculous that will be a runner-up in wikipedia for most idiotic business move ever.
- nostrademons 12y ago
  People thought the same about YouTube, but that turned out to be a brilliant (and very profitable) move. Then again, they also thought the same about AOL/TimeWarner, and they were absolutely right then. It's usually pretty futile to try to predict the future. I can see Zuck's reasoning with the Whatsapp purchase, though, and I don't think he's insane. He and Larry probably understand the structure of the tech industry a lot better than most people.
  - enneff 12y ago
    The way I see it: Facebook's edge is its social graph. WhataApp had independently built a massive social graph, just like Instagram did. Facebook simply cannot afford to not acquire these companies.
  - fractalsea 12y ago
    YT was bought for $1.65bn in shares which is an order of magnitude less.
    - declan 12y ago
      Exactly. And I recall that some of that was held back in case Viacom won the copyright lawsuit.
  - mgkimsal 12y ago
    "He and Larry probably understand the structure of the tech industry a lot better than most people." They don't need to understand it - they define it.
  - halviti 12y ago
higherpurpose 12y ago
Google wouldn't have paid $20 billion for Whatsapp, and the only reason Facebook did is because their stock is very overvalued, and Zuckerberg knows that, so he's taking advantage of it while he can. Google's stock isn't that overvalued, if at all so they can't buy apps with $20 billion of what is basically "play money".
- Taurenking 12y ago
  This 100 times
- declan 12y ago
  I think this is correct. The WSJ today had a piece offering much the same analysis: that because Facebook's stock is (arguably) overvalued relative to revenue and expected growth, investors are encouraging the company to do these sorts of deals. It's a perfectly logical outcome if you have high stock valuation and not as much cash on hand.
JumpCrisscross 12y ago
I understand why we have dual-class share structures. There are cases in which investors may trust management more than their fellow shareholders. Yet I am concerned about the structures' dynastic qualities. Larry Page is a competent executive. That may not be the case in 40 years. Tom Perkins's letter to the editor comes to mind [1]. The question of what happens after Page is more troubling. Limiting control to the founders' offspring is concerning. Granted, there are valid counterexamples. Warren Buffett is as old as he is wise. And Samsung seems to be plodding along just fine despite its family's feuds. But shareholders should have input into these issues. Perhaps the super-voting stock lapses to normal stock after its original recipient's demise. Or maybe non-voting shareholders have one right: the right to call and vote on motions of no-confidence. Such motions, if passed by a super-majority of subordinated voters, would collapse the super-voting stock to normal stock. Aristocracy runs thick in the veins of European business. It is worrying that we may be sprouting our own contractually-annointed Silicon Valley royalty. [1] http://online.wsj.com/news/articles/SB10001424052702304549504579316913982034286 http://online.wsj.com/news/articles/SB1000142405270230454950...
- maxerickson 12y ago
  I thought the old Class B shares converted on transfer? Did the split change that, or am I misunderstanding that passing the shares to offspring would be a transfer?
- nordsieck 12y ago
  ... or they could just not buy Google.

sillysaurus3 12y ago

Did FB pay $19B for Whatsapp in order to prevent Google from acquiring their userbase? That is, FB got into a bidding war with Google over Whatsapp?

nyrina 12y ago
It could certainly be a large factor in the massive price. $19B is a whole lot of money, even (especially?) for a company the size of WhatsApp
- eitland 12y ago
  Interestingly the size of WhatsApp (the team and the required hardware) compared to its userbase might actually be one of the reasons why the price went so high. In other words, - they had a very good engineer to end user ratio.
  - matthewmacleod 12y ago
    I don't think so. They'd obviously built a stable platform, but it's not anything that Facebook couldn't have recreated with far less investment.
    - jbrooksuk 12y ago
      Then they probably spent so much to acquire the user base.
  - alandarev 12y ago
    Oh please, the companies are being bought out not because of some engineering masterpiece, but for already checked and working idea + loyal userbase.
    - lallysingh 12y ago
      I think the parent meant that in terms of a technical cost to user count ratio.

muyuu 12y ago

Why would Google be required to pay cash when Facebook wasn't?

matthewmacleod 12y ago
That's the point of this change - Google weren't required to pay cash, but given their limited ability to offer stock deals without dilution of the founders' voting rights, it was probably not possible to offer stock.
- gcb0 12y ago
  This is nonsense. If they could have offered x billions in y shares, what change now? Will people accept offers for x billions in 2y shares? It makes zero sense!
  - Jacqued 12y ago
    The new shares issued here have stricly no voting rights. So they can offer them in any quantity without having to worry about diluting their voting rights. Whereas offering 19B in voting shares (even though I'd imagine class A shares have less rights than class B) might have been enough to dilute Brin and Page's voting rights significantly.
    - gcb0 12y ago
      makes sense now. thanks. but then, wouldn't the non-controlling shares be deemed worthless in the long run and it's price plummet in comparison to the controlling shares? Any other big company did that before?

moe 12y ago

Muscled? I mean... not to rain on anyone's parade. Perhaps someone just came to their senses? 19 billion dollars, for a messenger app, is more than just a little bit ridiculous. It's the kind of ridiculous that will be a runner-up in wikipedia for most idiotic business move ever.

nostrademons 12y ago
People thought the same about YouTube, but that turned out to be a brilliant (and very profitable) move. Then again, they also thought the same about AOL/TimeWarner, and they were absolutely right then. It's usually pretty futile to try to predict the future. I can see Zuck's reasoning with the Whatsapp purchase, though, and I don't think he's insane. He and Larry probably understand the structure of the tech industry a lot better than most people.
- enneff 12y ago
  The way I see it: Facebook's edge is its social graph. WhataApp had independently built a massive social graph, just like Instagram did. Facebook simply cannot afford to not acquire these companies.
- fractalsea 12y ago
  YT was bought for $1.65bn in shares which is an order of magnitude less.
  - declan 12y ago
    Exactly. And I recall that some of that was held back in case Viacom won the copyright lawsuit.
- mgkimsal 12y ago
  "He and Larry probably understand the structure of the tech industry a lot better than most people." They don't need to understand it - they define it.
- halviti 12y ago

higherpurpose 12y ago

Google wouldn't have paid $20 billion for Whatsapp, and the only reason Facebook did is because their stock is very overvalued, and Zuckerberg knows that, so he's taking advantage of it while he can. Google's stock isn't that overvalued, if at all so they can't buy apps with $20 billion of what is basically "play money".

Taurenking 12y ago
This 100 times
declan 12y ago
I think this is correct. The WSJ today had a piece offering much the same analysis: that because Facebook's stock is (arguably) overvalued relative to revenue and expected growth, investors are encouraging the company to do these sorts of deals. It's a perfectly logical outcome if you have high stock valuation and not as much cash on hand.

JumpCrisscross 12y ago

I understand why we have dual-class share structures. There are cases in which investors may trust management more than their fellow shareholders. Yet I am concerned about the structures' dynastic qualities. Larry Page is a competent executive. That may not be the case in 40 years. Tom Perkins's letter to the editor comes to mind [1]. The question of what happens after Page is more troubling. Limiting control to the founders' offspring is concerning. Granted, there are valid counterexamples. Warren Buffett is as old as he is wise. And Samsung seems to be plodding along just fine despite its family's feuds. But shareholders should have input into these issues. Perhaps the super-voting stock lapses to normal stock after its original recipient's demise. Or maybe non-voting shareholders have one right: the right to call and vote on motions of no-confidence. Such motions, if passed by a super-majority of subordinated voters, would collapse the super-voting stock to normal stock. Aristocracy runs thick in the veins of European business. It is worrying that we may be sprouting our own contractually-annointed Silicon Valley royalty. [1] http://online.wsj.com/news/articles/SB10001424052702304549504579316913982034286 http://online.wsj.com/news/articles/SB1000142405270230454950...

maxerickson 12y ago
I thought the old Class B shares converted on transfer? Did the split change that, or am I misunderstanding that passing the shares to offspring would be a transfer?
nordsieck 12y ago
... or they could just not buy Google.