When Facebook (NASDAQ:FB) initially announced that it will be purchasing WhatsApp in a deal valued at $19 billion, the valuation seemed ridiculous. While a number of analysts and journalists have offered up reasonable ideas as to how WhatsApp may really be worth a multibillion-dollar figure, WhatsApp's pricey valuation in and of itself could potentially reveal one of Facebook's greatest threats: other Internet start-ups.
If a 55-employee start-upcan launch an incredibly valuable service to connect half of a billion people in just five years, then perhaps the barriers for competing social networks are lower than investors initially thought. Perhaps it's not so difficult to scale a network to levels at which the network effect has the ability to disrupt other networks. If all it takes is 55 employees and five years to build a game-changing network of connected people, is Facebook's business as sustainable as its premium-priced stock suggests? Watch the following video for more.
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Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.