Facebook-Owned WhatsApp Lost Close to $200 Million in 2 Years
As a result of the official closing of Facebook’s acquisition of cross-platform instant messaging application WhatsApp, the first clear picture of WhatsApp’s financial results emerged. A Form 8-K/A filed with the Securities and Exchange Commission has revealed that in 2014, WhatsApp lost $140 million and generated just $10 million in revenue. And in 2012 and 2013, the app lost a total of $192.8 million.
In the six months ending June 30, 2014, WhatsApp brought in $15.921 million in revenue but suffered a net loss of $232.5 million. However, $206.5 million of the net loss was for share-based compensation expenses and issuance of common stock below fair value. Its net cash used in operating expenses during the first half of 2014 was $13.5 million, which sounds much more reasonable.
“We’re the most atypical Silicon Valley company you’ll come across,” Brian Acton, a WhatsApp co-founder, once said in an interview. “We were founded by thirty-somethings, we focused on business sustainability and revenue rather than getting big fast, we’ve been incognito almost all the time, we’re mobile first and we’re global first.”
Essentially, due to WhatsApp’s quickly rising valuation, it used share-based compensation to attract top talent. Eventually, the $22 billion acquisition by Facebook largely made the ‘expenses’ of issuing that stock moot. This is standard for growing companies hiring new talent, and shouldn’t convey that WhatsApp was burning money irresponsibly. $148 million is a lot to lose for a small company, but the company seems to have been doing it wisely. Fewer than $10 million was burned in 2013 in actual operating expenses.
Overall, Facebook broke down the money it spent on WhatsApp as $2.026 billion for the user base, $448 million for the brand, $288 million for technology, and $21 million for the rest. That left it to chalk up the $15.314 billion difference as “good will” aka the value “from future growth, from potential monetization opportunities, from strategic advantages provided in the mobile ecosystem from expansion of our mobile messaging offerings.”
