For $19 Billion, Facebook Could Have Bought These Five Companies

Facebook is at it again! Remember way back when the world thought it was crazy for Facebook to buy Instagram for $1 billion?  And remember when it was announced that Google was buying nest for $3.2 billion? It’s a little cute how seriously everyone took those deals, but with the announcement of Facebook’s acquisition of WhatsApp, those deals are positively tiny. Facebook is purchasing the mobile-messaging startup WhatsApp for $19 billion (that’s billion with a B) in cash and stock – that’s a sum larger than the GDP of many countries.

By comparison, the Instagram and Nest acquisitions look like chump change.

This aggressive move shows Facebook’s determination to establish control over the messaging market and move more heavily into mobile. Facebook, which has a market cap of $177 billion, seems to have no reservations about making big acquisitions. Meanwhile, we recently speculated about Apple making the ‘big’ move to acquire Tesla - to put things in perspective, Tesla is valued at around $25 billion, while Apple, a reluctant acquirer, has a market cap of $474 billion.

So essentially, Facebook almost shelled out enough to buy Tesla, which is a proven generator of revenue. Instead, it bought WhatsApp, a five year-old company with 55 employees.  One of the main reasons for the acquisition is WhatsApp’s insane growth rate. It has more than 450 million users, more than 70% of whom use it every day, sending on average 19 billion messages every 24 hours.  Essentially Facebook is paying $42 per user (while Twitter users are worth $212).

So Facebook just spent about 11% of its market value - but bought a youthful and engaged community of users. Some have said they paid such a high price just to keep Google from grabbing WhatsApp. Whatever the reason - the world has a few more billionaires, and a lot of people left in shock.

Whatever the reason for the purchase, $19 billion is a lot of money. More than half of the companies in the S&P 500 have market capitalizations smaller than WhatsApp's price tag. There are also many tech companies, too, that Facebook could have added for $19 billion. In fact, it could have purchased several companies, spanning different areas, for that price.

Here are five companies that Facebook could have purchased, together, for less than it paid for WhatsApp.

5 AirBnb - $2.5 Billion

The couch surfing pioneer is live in close to two hundred countries. If it was a hotel, it would be booking over 60,000 rooms each night. The company has a valuation of over $2.5 billion. In early 2013, Airbnb had over $1.7 billion in sales. Its expansion rate, too, has enjoyed exponential growth. The service could only benefit from the kind of exposure and integration that Facebook could grant it, but there is no deal on the table at the moment.

4 Uber - $3.5 Billion

In September, Uber, the on-demand taxi service, raised more than $360 million, with $250 million coming from Google, giving it a valuation of $3.5 billion. Uber is also bringing in revenue, and projected to make $125 million this year. It also has a pretty nice growth curve: growing from a valuation of $330 million in late 2011.

The company is clearly onto something pretty big, and it's not so far-fetched to imagine a Facebook with taxi services built-in. It would be a great step toward making Facebook a functional service with a reach beyond its user-posted content.

3 Pinterest - $3.8 Billion

In 2012, Pinterest was valued at $1.5 billion. In a little over a year, its valuation increased by over $2.3 billion. Not a bad few months for a three-year-old company. Though it currently doesn’t generate much revenue, Pinterest is expected to be working on a monetization strategy.

The site drives more traffic toward businesses than any other social network, beating out Facebook and Twitter by far. This has led to speculation that it is a contender to lead the future of online shopping. The company recently acquired VisualGraph, an image recognition engine. Perhaps this will help it make something of the $564 million it recently raised.

2 Snapchat - $4 Billion

Mark Zuckerberg made multiple acquisition offers to Snapchat, none of which were accepted. So, in December 2012, Facebook rolled out a Snapchat clone called Poke, itself an expiring messaging system.

Then, in 2013, Zuckerberg offered $3 billion to Snapchat, and was rejected again. Google reportedly offered $4 billion, and was shot down as well. Part of the reason these companies are so interested in Snapchat is that it has attracted a large, young user-base- and its users tend to be people who are not big users of Facebook or Twitter. This is one way Facebook could gain those users.

Of course, having acquired WhatsApp is sort of a polite way for Facebook to slap Snapchat in the face.

1 Square - $5 Billion

A payment processing solution, Square currently has a $5 billion valuation. Square is expecting to process $30 billion this year, which is up drastically from the $1 billion annual processing rate in 2011. Like many of the other companies on this list, Square has a strong growth rate. In 2009 it was valued at $45 million. By June 2011, it was valued at $1.6 billion, and by January 2104, it is at $5 billion. More and more companies and businesses are relying on Square for payments, making this a lock to be a major player sooner than later.

So Facebook could have bought some combination of the companies listed here. It is hard to see that owning WhatsApp is better than owning: Snapchat + Square + Pinterest + Uber + AirBnb (= $18.8 billion). But Zuckerberg and the rest of the Facebook team probably know what they’re doing.

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