Text Analytics and Why WhatsApp was a Good Deal for Facebook

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According to Tumblr, I could buy the Hubble Telescope, the NBA or the top 20 football clubs in the world for less than what Facebook paid for WhatsApp.  The price tag was a mind-boggling, eye-popping $19 billion and while Wall Street seems OK with the number (both analysts and the market so far have given it the thumbs up), many a man on the street seems stunned by the price tag.

In my opinion, this acquisition makes a lot of sense:

WhatsApp is a highly profitable company with 450 million users and in the foreseeable future can be expected to reach an even larger user base of 1 billion users or more. (In fact, news of the acquisition has caused a flurry of downloads amongst my office mates, and I suspect others as well.) While Facebook’s own messaging application couldn’t be called omnipresent, WhatsApp’s level of usage is extremely high, especially outside the US.

In Germany, almost half of the population, 30 million people, are using WhatsApp on a regular base. Understanding those messages gives lot of insights into the desires and interests of an important economy like Germany.   Using text analytics to add new user insights could improve FB’s ability to offer personalized ads to their base.   If the additional data leads to better predictive models and better placed ads, and if this leads to only a 10 percent revenue increase for FB, this acquisition will pay off handsomely.

FB’s market cap is currently ca $170B based on $8B in revenues.  Increasing revenues by 10% could lead to market cap increase of 10% or more – or $17B — very close to the sale price.




Ingo Mierswa

Ingo Mierswa

Ingo Mierswa is the founder and president of RapidMiner and an industry-veteran data scientist since starting to develop RapidMiner at the Artificial Intelligence Division of the TU Dortmund University in Germany. Mierswa, the scientist, has authored numerous award-winning publications about predictive analytics and big data. Mierswa, the entrepreneur, is the founder of RapidMiner. Under his leadership RapidMiner has grown up to 300% per year over the first seven years. In 2012, he spearheaded the go-international strategy with the opening of offices in the US as well as the UK and Hungary. After two rounds of fundraising, the acquisition of Radoop, and supporting the positioning of RapidMiner with leading analyst firms like Gartner and Forrester, Ingo takes a lot of pride in bringing the world’s best team to RapidMiner.