The April Fool’s Day Deal Evaluator

I’ve come up with a new theory for evaluating mergers (or sports contracts, etc), called the April Fool’s Day Deal Evaluator.

It works like this:

Law 1:   If, upon reading a headline about a merger, you immediately check your calendar to see if it’s April Fool’s Day, it’s probably not a good deal for the acquirer and a great deal for the target (SOLD TO YOU, SUCKA!).

Law 2:  If, upon reading a headline about a merger, you think “If I were reading this on April Fool’s Day, this would be funny,” then it’s probably not a good deal for the acquirer.

That being said, and with the caveat that I am a user of neither Facebook ($FB – no positions) or WhatsApp, the headline “Facebook to buy WhatsApp in $19 Billion cash and stock deal” rings positive on both laws of the April Fool’s Day Deal Evaluator.

Henry Blodget called the deal bold, not stupid – but what is “bold” worth?  Bold is having unprotected sex with a hooker in Tijuana.  That’s bold.  Or is it stupid?  I am all confused again.  Interestingly, Blodget was intimately familiar with Internet Bubble 1.0, aka 1998/1999 tech – and saw the crapload of “bold” deals back then that failed – although perhaps most of them were suckers stockholders being “bold” by buying the stock that the company was selling.

Anyway, I cannot pretend to be an expert on social networking and messaging of the future.  I have a flip phone for goodness sake.  I am not on Facebook, WhatsApp, Tinder, Snapchat etc etc etc.  I’d never even heard of WhatsApp until last night.

Josh Brown raised an interesting point today when he wrote:

“In the meanwhile, Facebook announced a deal to buy WhatsApp for $19 billion. They’re getting 450 million users – whose single defining, unifying factor as a “network” is that they went out of their way to avoid paying wireless carriers for text messaging.”

That reminded me of something that I wrote about Groupon ($GRPN – no positions) years ago:

I mean no offense to Groupon’s users – if they covered my ‘hood I’d use them too – but Groupon’s asset is their base of 35mm of the worst type of customers a business could ask for – serial deal whores.  Yes folks – admit it – if you’re the type of person who is patronizing a merchant only because you got a coupon, you’re also the hardest type of consumer to convert into a repeat full paying customer – which is the merchant’s goal, of course.

How do you monetize people who are using your product because it’s cheap/free?  Well, in Facebook/WhatsApp’s case, the goal is likely to sell them stuff eventually: they are the customer that you advertise to.  This may mean that you show them mobile ads, or simply that you convert them to other platforms where you show them more ads.  But in any case, don’t they need to buy something eventually from someone?  Either from the company providing the technology, or from the advertisers spending their ad bucks on the platform?

It’s silly for me to waste anymore time pondering the “value” that Facebook will be able to get from WhatsApp, but I don’t think I’ll lose a lot of sleep filing this one under SOLD TO YOU, SUCKA.

 

Josh Brown – NASDAQ Since 1996

Blodgett – Everyone Who Thinks The FB-WhatsApp Deal is Stupid Should Think Again

Abnormal Returns – Ultimate Facebook-WhatsApp Linkfest

KD – Groupon CEO Andrew Mason Has Huge Balls

-KD

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