No. WhatsApp is used by billions of people daily. SpaceX is a really good government contractor.
What % of AT&T's market cap ($175B) is its SMS business? What % of Lockheed Martin's market cap ($65B) is its space business? Think about the incumbents WhatsApp & SpaceX are trying to dislodge. Generally speaking the ones WhatsApp (now Facebook) are larger by market cap than the ones SpaceX is targeting. That reflects the fact that something everyone uses a little bit every day is generally worth more than something used by very few people, intensely.
> That reflects the fact that something everyone uses a little bit every day is generally worth more than something used by very few people, intensely.
Yup. Toilet paper is a massive industry, too, worth a lot of money.
Even if each one of them was paying the $1 annual fee, that's still less than a billion dollars in revenue.
Also, often valuations are based on the number of employees. SpaceX has 3,000 plus billions of dollars in capital equipment. Whatsapp had 55 I believe and basically zero dollars in capital equipment.
I think that there is more to this deal than "Google gets 10% for $1 billion". There is no way SpaceX is only worth $10 billion.
You've probably put your finger on exactly why Whatsapp is 2x SpaceX - 55 employees and zero capital equipment. Grow it by 10 and it all goes straight to the bottom line.
Valuations of small startups where the vast majority of staff have a high value to a buyer and can be locked into continued employed relatively cheaply are often valued based on the number of employees. How many of those 3,000 SpaceX staff would be of interest to the handful of companies that might have an interest in buying the company?
Further, that's of little relevance to a minority investor like Google, as they can't turn around and say "let's sell to Lockheed now", and staff moves.
In terms of capital equipment, you have to consider how quickly that equipment depreciates and who might be interested in it. Is there even a market for X billion in whatever equipment SpaceX owns? The purchase price is irrelevant.
I saw many people using this argument of the "small value but for many people". But I think we should take in account also the replaceability factor: the hundreds of millions of users of Whatsapp could switch at any time, with no effort and no loss, to any other messaging application. There's plenty of them. As for the actual revenues of Whatsapp, they're approximately 0.
Don't they need Whatsapp though to get messages from others that use it? The network effect is strong and it is unlikely someone can make an orders to magnitude improvement on messaging software the compels people to switch. Barring major missteps they can be reasonably sure to keep a hold on the market.
Hmm. I started messaging using ICQ, then probably Yahoo, then microsoft messenger, now it's Skype. The first three offered exactly the same service. The other day I tried to convince someone to contact me on Whatsapp but he has already Viber. The network effect doesn't seem to be that strong, and sudden, catastrophic network switches happen all the time.
Right, so glad that everyone is still on AIM, ICQ, or even, BBM. They had huge networks, and barely anyone uses them now. This market has proven multiple times that users will switch and it will happen suddenly.n especially if whatsapp tries too hard to monetize them.
You couldn't possibly compare Gmail or Facebook with Whatsapp.
For many people, their Gmail id is their sole or primary id on the internet, used to identify them to scores of websites. It is their official online point of contact for various aspects of their online lives including their career, banking, social networking etc.
Facebook is their online social profile, which they spent thousands of hours curating.
Your Whatsapp id is merely your Phone no., (which was Whatsapp's main selling point). All interactions in Whatsapp are ephemeral in nature - Most people delete their conversations when their phone memory gets full. Compared to gmail and facebook, the switching costs are practically zero.
That's almost what he did—he was one of the founders of Paypal. Not exactly a "social" app, but he definitely used his fortunes from something more mundane to fund his more daring ventures.
I think social apps are harder than crazy ambitious ideas. It's easier to see how one would work on them, that's for sure. But precisely for that reason we see many many social apps. But few are trying to build spacex or similar, so it's easier to make progress along the axis of figuring out ways to create value.
No one knows what the demand curve for space looks like. Those who feel SpaceX is crazily undervalued implicitly assume two things: A steep demand curve* and that SpaceX will continue to drive down prices by large amounts.
*This is equivalent to: There are tons of people who think space is cool or useful and do nothing because it's too expensive and that won't be true with SpaceX's costs in 10 years.
Unlikely. Employees could be gone in <whatever their notice period is>, so you can't put that much accounting value on them. Factories are worth something, sure, but they're pretty much a commodity; if they were destroyed in an earthquake or something SpaceX would just rebuild them. Most of the value of SpaceX's assets will be in the designs (particularly the engine/turbopump design), not even the design itself so much as the fact that it's been validated and proven (and is cheap to produce). That and, perhaps even more important, having an organization that's proven its ability to solve rocketry problems and continue to make improvements.
My understanding from listening to Musk's announcements since SpaceX was relatively a new company was that the real differentiater cost-wise for the Falcon 9 merlin engine is the manufacturing process, not the rocket itsself.
I seem to remember Elon saying this himself in a relatively recent announcement. I believe it was the one where they unveiled the human pod thingy to go ontop of the falcon, but could be wrong. Either way, they use modern design and manufacturing methods, where the competitors like ULA use methods developed in the 70s and refined slightly in the 80s.
> I also think about their 3,000 employees and billions(?) of dollars of capital equipment would be worth a lot?
The capital equipment probably is largely pretty specialized to not only the market they are in but their approach to it, and may not be that marketable on its own.
And, despite the name "human resources", regular employees aren't property, and their attachment to SpaceX may be fairly tenuous, particularly in the event of a change in management and operational style.
Sorry, but how in the world will WhatsApp dislodge AT&T? The ONLY way it could do so is if FB and Musk/Google create the space-based inet access for the globe- then transition the entirety of the WhatsApp user-base to that system.
This isnt a bad idea actually - "if you want access to WhatsApp-X, then you must use Space-X inet service"
Stock valuations are based on what investors think the earning potential of a company is. While rocket companies are beyond cool it's a pretty difficult business in which to actually make money.
I think messaging apps are even more difficult, right? SpaceX has made around $4 billion on contracts so far which I would guess is more than whatsapp.
Whenever you have huge fixed capital costs and high per-unit costs your upside is limited. A 10x increase in the whatsapp user base doesn't increase costs much, while SpaceX probably couldn't deliver on a 2x increase in volume for a few years. That's just the handicap of a business that makes real things.
What investors are looking at is potential. The upside for heavy-industry SpaceX is far more constrained than that of a social media company.
A 10x increase in the user base of WhatsApp would make their user base every single human on Earth, give or take a couple hundred million. Probably not going to happen. And even with 1/10 of Earth as its user base, it was making <$1B/year.
I'd argue that the upside of making launches happen at 1/10 the traditional cost, with the potential for easy reusability with minimal refurbishment (which will allow much more than 2x launch volume, and a much greater cost reduction) is larger than WhatsApp's to a hilarious degree.
Yes, but they haven't made $4 billion in profits. That's "just" their revenue from the contracts. Compared to a software company, they have huge capex and huge operating costs.
Super-late reply but yes, agreed. I am wondering how much value they have in capital goods and land? Like if whatsapp goes bust, it's worth zero but SpaceX has some assets it could sell. And again, they have 3,000 employees, I would think buying heavily considers the size of the workforce they are acquiring.
Facebook's acquisition of WhatsApp was probably primarily defensive. By that, I specifically mean, "They were worried that WhatsApp would cause them to lose revenue from their core business, and their valuation of WhatsApp was heavily based on avoiding that potential loss."
Not sure why you're being downvoted, that was my first thought as well. Sure, I understand the concept of defensive acquisitions, valuation as what people are willing to pay, per-user value, developing world markets, etc. But rockets are still rockets, and a messaging app is still a messaging app. I think it's the incredible disparity in total embodied energy for WhatsApp vs SpaceX that makes this intuitively hard to accept.
>But rockets are still rockets, and a messaging app is still a messaging app. I think it's the incredible disparity in total embodied energy for WhatsApp vs SpaceX that makes this intuitively hard to accept.
The hardest thing I ever did as an investor was let go of thinking there's some correlation between the things I like and market value.
One thing that needs to be considered is that SpaceX is operating in a space that has far higher risk for a (relatively) indeterminate reward right now. A single accident could severely damage the company's reputation and revenue stream, and I think their valuation might reflect this cautious approach to their business model.
I agree; though as a side point - after 3 failures in 2008 and that famous "optimism, pessimism, fuck that" quote, I want to believe it will take more than just a single accident to damage SpaceX's reputation.
You could replace spacex with whatsapp in that paragraph and it would still be true- more so even- the barrier to change with messaging apps is almost zero however everyone knows rockets are hard and no one expects a failure on the pad to destroy what is looking like a good launch track record.
If whatsapp start charging or introduce ads I can't see why people would stick around, considering the Huge number of whatsapp users who also have viber/snapchat/basis sms also installed
SpaceX has tremendous potential, but most of what will make them lots of money has yet to be proven--both technical and economic.
It's possible they'll never figure out launcher re-use, or get it working well enough to matter. It's possible they will and no one will care that space launch is now 10% what it was, and flight rates will stay the same, and they'll just end up dominating a relatively small and stable niche. It's possible the incumbents will quickly copy their techniques and push them aside. It's possible they'll fail in enough launches to drive off every customer and bankrupt the company.
I don't believe any of that, but it's possible and you have to take the uncertainty into consideration of value. Whatsapp has users and works and will continue to work. You know what you're getting there.
Yea but you could make arguments that whatsapp could suffer any number of ill-fated results. There's no business without risk. Technical risks are difficult but whatsapp has only shown that it can charge $1/year. $19 billion is a bet (and a risky one) that they will be able to squeeze more money out of those 700 million users.
Whatsapp was not bought only for its revenues or revenue potential, but also to protect against them turning around and using that userbase in a way that could turn into a threat to Facebook (whether themselves, or by selling to someone else).
WhatsApp could go MySpace overnight. Or I guess more accurately, go BBM. If they had a multi-day outage, how many users would they have on the other side?
The real answer was given by simonh elsewhere in this thread: the comparison is moot since they aren't publicly traded companies. The market is not saying that Whatsapp is worth double of Spacex.
I guess this is an old discussion, but WhatsApp seriously threatened the dominion of Facebook, a company that is valued at $209B simply for owning a significant amount of the daily attention span of consumers world-wide.
Essentially, the value of WhatsApp is based more on what it could have destroyed than on what it could have created. Advertising is kind of funny like that, since it's not a product that consumers actually want. No value is lost to consumers by switching to a platform without advertising, even though the economic damage to advertisers can be huge.
This is what I wondered too. I think there must be something we are missing. SpaceX has 3,000 employees and tons of capital equipment. They have contracts worth billions of dollars and loads of proprietary technology?
I thought they were already profitable? But is that incorrect? It would seem disingenuous to claim that they lowered the price of space travel by 90% if they actually weren't even breaking even? hahahha.
The investors also believe that their 10% stake is worth more than $1B. That's why they invested. Maybe SpaceX could have got more. But at this valuation they closed the deal and now have $1B to play with. Both parties happy.
The difference is straight forward - Facebook "owns" Whatsapp, and the deal was paid majorly through stock, if I remember correctly, vested over a period of time.
SpaceX still has it's independence and fresh infusion of $1billion in cash. It would probably fetch much more than $10 billion if it sold out now, but I doubt Musk would want to do that.
Had a similar realization when I caught up with my old boss at a big aerospace/engineering conglomerate. I looked it up and it had an $11 billion market cap. He (being in a smaller town) hadn't heard of Uber, which has ~$16 billion market cap.
And the company I work for, which employees about 45,000 people in 25 countries, mostly in factories building complex electronics, only has a $2b market cap.
The WhatsApp acquisition was an aberration. Zuckerberg was desperate and the WhatsApp founders knew it. Trying to rationally justify it is a bad idea that just leads to wrong conclusions. Nothing should be compared to it.
Our society would be unrecognisable without it. Most of the things we complain we could be doing instead of the space industry, we have good information on to complain about them due largely to the space industry.
I think that is true for our space industry in the 50's and 60's, but we've had a space station up there for years and what has come out of that? Im playing a bit of the devils advocate, but honestly all I hear is 'we are preparing for deeper space missions..."
And it is arguable that the science being done on the ISS doesnt have as massive of an impact on society when you compare it to what we gained with early space exploration. Just because it is called 'science' doesn't mean it's beneficial, there are plenty of useless scientific studies that are performed everyday around. For instance the 'Portable Glovebox (PGB)' that was on the ISS sounds like really amazing research being performed....
"The Portable Glovebox (PGB) was developed for the European Space Agency for use on the International Space Station (ISS); it can be transported around ISS and used in any laboratory module. The PGB confines accidental spillage of materials and helps prevent contamination of biological materials when the experiment containers are opened for observations, sampling, and fixations."
Yes. Figuring out design and use of lab equipment for microgravity conditions, as well as actually using it in further experiments, is definitely not beneficial for anything.
The specs on this thing are less than impressive and could easily have been developed on earth. (See my response to the other comment). Its a clean box with negative pressure.
Part of the experiment actually involves using this thing for microgravity experiments (also gaining knowledge about operations of space labs). Unless you have an antigrav generator handy or suggest science should be done in a vomit comet, I'd say it's important.
BTW. one of the important research done in orbit I recently learned about is figuring out how plants sense gravity. There were some cool results wrt. that, and this is the kind of research that is both important and hard to do on the surface.
My original argument was that the ROI is debatable in terms of how much we spend on space these days. Is it worth billions of dollars for the things we have talked about? Probably not in the grand scheme of things (Im not knocking space, or research just the fact that people bitch about how little we spend when it sort of makes sense to me).
Yes, but you have done the equivalent of walking into a lab and complaining that what they are doing isn't cutting edge enough, as you looked at an experiment and all it did was change a flame from yellow to blue, before it being pointed out that you were just looking at a bunsen burner.
Well, it was developed on earth. However, they have a 3d printer up there now, so you never know, the next one might not be.
Also, you seem to be confused as to the purpose of the glovebox. While there may be an experiment to test it, it is not an experiment, it is apparatus for experiments.
" The PGB provides two levels of containment; the first level being the enclosure itself (box, gloves, filter), the second level is realized through a negative pressure of 4 mbar inside the box." -- This is not ground breaking science.
The box isn't the science, it's a box for doing science in and a portable one was useful as their other glovebox is fixed to the wall. You might as well complain about research institutions for being made out of bricks.
I would much rather be an investor in whats app than spacex. It may be decades before spacex develops anything beyond the prototype level, whereas whats app can quickly scale and become the next Facebook or Google with a few years.
> whats app can quickly scale and become the next Facebook or Google with a few years.
Whatsapp got bought by Facebook, they will definitely not become the next Facebook and I sincerely doubt they'll ever become the next google. Try as I might, living without Google is hard, living without Facebook is stupidly easy.
