While there were many who questioned Facebook (NASDAQ:FB)spending $21 billion to acquire WhatsApp, the deal sure looks a lot better now.
With 900 million monthly active users, the messaging site has a bigger audience than Instagram and Facebook Messenger by almost double. Of course, while WhatsApp may be the leader, all of the company's smaller brands are on the path to playing an important role in Facebook's bottom line. In the following video, analysts Dylan Lewis and Sean O'Reilly discuss the social giant's messaging services.
Listen to the full podcast by clicking here. A transcript follows the video.
Sean O'Reilly: What's up with the other properties? You were talking about it. What do they own? Can we make fun of WhatsApp some more? What else do they own, and how are those doing?
Lewis: Just to check in on some user counts for the other properties that I'd mentioned earlier: Instagram is up to 400 million monthly active users; Messenger up at 700 million monthly active users; and WhatsApp at 900 million monthly active users.
O'Reilly: You keep talking about the services that are free from what I can tell. What attracted the most attention? Did they give them a hard time for WhatsApp still? Are they waiting and seeing? Because need I remind our listeners, they spent $21 billion on this.
Lewis: After settling? Yeah. I think the sticker number on that ...
O'Reilly: It's actually looking good -- it's actually looking bad now because the stock is at an all-time high.
Lewis: One of the coolest things about that transaction was that sticker cost was $19 billion and because so much of the deal was weighted toward stock grants it wound up ballooning to $21.
O'Reilly: I had to think it's more now. What was the stock then?
Lewis: Solely because of stock price appreciations.
O'Reilly: Appreciations. Good for the WhatsApp guys.
Lewis: Yeah, great for them. They focused quite a bit on Instagram in the conference call, not surprisingly because I think the one that has the clearest path to monetization, right? It's the most similar to what has worked already with Facebook and a lot of the messaging from them was along those lines.
O'Reilly: We used Instagram at Foolapalooza, a lot of people I know still use it.
Lewis: It's very popular. Last I checked I think it was 9 months ago and they had 300 million monthly active users.
O'Reilly: Awesome growth, yeah.
Lewis: So you're seeing really solid growth, which is great. I think that is the next big segment for them. They started introducing ads this quarter.
O'Reilly: So it is going to be ad based?
Lewis: Yes, but they're going to be -- and this is something they've communicated several times -- they're going to be very slow and very deliberate about what that ad rollout looks like. They've been very selective when it comes to what is good enough to be on the platform. They know it's a valuable space and they don't want to mess with user experience because of that.
They talked a little about a common ad infrastructure between Facebook and Instagram and I think that's one of the most encouraging things. Like I said, so much of their learnings from their namesake platform are transferrable to Instagram as they try to monetize it. You have to love that, as an investor.