Which acquisition has had better returns for Facebook, WhatsApp or Instagram? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world. Answer by Jeremy Arnold, Business analyst, on Quora:

As things stand today, Instagram has returned far more in value. But Facebook's long-term plan for WhatsApp is just now coming to fruition.

  • Instagram was much cheaper (just $1 billion, compared to a net price of around $22 billion for WhatsApp). It's gone from 30 million daily active users at acquisition to over 500 million today (with another 300 million that use it at least once a month). It's contributing about $1 billion per quarter in revenue, and about the same per year in net profit -- numbers that will continue to climb, with no ceiling in sight.
  • This doesn't account for the value of their new Direct spin-off app (a Snapchat messaging clone), or Instagram's value as a cultural institution. All in all, we're talking a spectacular return on investment.
  • WhatsApp, in contrast, hasn't been meaningfully monetized yet. Just as with early Facebook, focus has been on growth. Monthly active users have more than doubled from when the deal closed (now 1.3 billion), most of whom live in emerging countries where Facebook can layer additional needful services on the base platform.
  • WhatsApp's two largest competitors, Line and WeChat, earn a respective average revenue per user of $7 and $9 USD. At those figures, WhatsApp would be bringing in $9-12 billion a year. Now, this isn't a totally fair comparison, as those platforms serve ads that we'll never see on WhatsApp. But those apps do something else really well that WhatsApp is very interested in copying: payments.
  • WeChat's core value in China is as the country's most efficient payments app. Whether for ecommerce (ordering food or movie tickets) or sending rent to your landlord, mobile has taken over the role of cash and credit cards. WeChat Pay alone handled around $2 trillion in transactions in 2016, a number which has likely doubled since then.
  • While Line is at a somewhat slower pace of growth, they're still doing in excess of 10 million transactions per month at a gross value of $482 million USD. While $6 billion a year might not sound like much, the market is still nascent. Using China as a benchmark for where the world is going, that number is going to skyrocket with each passing year.
  • That context in mind, consider the state of the informal economy in India (where WhatsApp has the largest foothold), which has historically been cash dependent and where no mobile wallet has yet reached widespread adoption.

In sum, Instagram was a bargain that's turned a very tidy profit. WhatsApp was a very different sort of bet. If it can become the dominant payment app/e-commerce platform in a country of 1.3 billion people, it'll be one of the shrewdest acquisitions of the Information Age.

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Published on: Feb 23, 2018