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Author Topic: WhatsApp is everything wrong with the U.S. economy  (Read 161 times)
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« on: Feb 25, 2014 08:41 AM »


I was thinking about this whatsapp acquisition... who else thinks that whatsapp was becoming real competition and that's why they paid dearly to acquire it. Doing the calculations, with the money they spent they could have supported 19,000 families with solid jobs for their entire lifetimes of work!!

Sad Shrinking middle class. More ultra-rich elite and everyone else is the working poor....

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Robert Reich: WhatsApp is everything wrong with the U.S. economy
The instant messaging service connects millions, but its record-breaking sale won't generate new jobs


If you ever wonder what’s fueling America’s staggering inequality, ponder Facebook’s acquisition of the mobile messaging company WhatsApp.

According to news reports today, Facebook has agreed to buy WhatsApp for $19 billion.

That’s the highest price paid for a start-up in history. It’s $3 billion more than Facebook raised when it was first listed, and more than twice what Microsoft paid for Skype.

(To be precise, $12 billion of the $19 billion will be in the form of shares in Facebook, $4 billion will be in cash, and $3 billion in restricted stock to WhatsApp staff, which will vest in four years.)

Given that gargantuan amount, you might think Whatsapp is a big company. You’d be wrong. It has 55 employees, including its two young founders, Jan Koum and Brian Acton.

Whatsapp’s value doesn’t come from making anything. It doesn’t need a large organization to distribute its services or implement its strategy.

It value comes instead from two other things that require only a handful of people. First is its technology — a simple but powerful app that allows users to send and receive text, image, audio and video messages through the Internet.

The second is its network effect: The more people use it, the more other people want and need to use it in order to be connected. To that extent, it’s like Facebook — driven by connectivity.

WhatsApp’s worldwide usage has more than doubled in the past nine months, to 450 million people — and it’s growing by around a million users every day. On December 31, 2013, it handled 54 billion messages (making its service more popular than Twitter, now valued at about $30 billion.)

How does it make money? The first year of usage is free. After that, customers pay a small fee. At the scale it’s already achieved, even a small fee generates big bucks. And if it gets into advertising it could reach more eyeballs than any other medium in history. It already has a database that could be mined in ways that reveal huge amounts of information about a significant percentage of the world’s population.

The winners here are truly big winners. WhatsApp’s fifty-five employees are now enormously rich. Its two founders are now billionaires. And the partners of the venture capital firm that financed it have also reaped a fortune.

And the rest of us? We’re winners in the sense that we have an even more efficient way to connect with each other.
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But we’re not getting more jobs.

In the emerging economy, there’s no longer any correlation between the size of a customer base and the number of employees necessary to serve them. In fact, the combination of digital technologies with huge network effects is pushing the ratio of employees to customers to new lows (WhatsApp’s 55 employees are all its 450 million customers need).

Meanwhile, the ranks of postal workers, call-center operators, telephone installers, the people who lay and service miles of cable, and the millions of other communication workers, are dwindling — just as retail workers are succumbing to Amazon, office clerks and secretaries to Microsoft, and librarians and encyclopedia editors to Google.

Productivity keeps growing, as do corporate profits. But jobs and wages are not growing. Unless we figure out how to bring all of them back into line – or spread the gains more widely – our economy cannot generate enough demand to sustain itself, and our society cannot maintain enough cohesion to keep us together.
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« Reply #1 on: Feb 25, 2014 06:33 PM »

this is totally messed up -- inflation through technology. 

tesla, whatsapp, facebook, all of these have outrageous market caps.  they are cool companies who are scamming the public with pie in the sky type rhetoric.

uncertainty usually harms a stock price.  here is masks the junk inside the company.

you have similar inflation in other fields. 

gareth bale was sold to madrid for 100m euros.  wayne rooney got a 300K pounds per week salary.   

it's like some people have too much money and don't know how to spend it.
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