Day, which is nearly all the Text Messages sent around the world combined. On welfare andp food stamps and was so poor he could not afford to call this family in the ukraine. His cofounder got turned down for jobs at facebook and twitter. Aftersult, both of them leaving yahoo started a messaging service that anyone could afford. Foundays ago the ceo himself eating Chocolate Covered Strawberries at Mark Zuckerbergs home on valentines day and striking a deal that will make him and his employees very rich. I want to bring in serena fido from new york as well as Jon Erlichman nla in l. A. Telephone we know about the interest from google and tell us what we know about the interest from google and microsoft. There was not really a formal process to sell whatsapp, but the company through the years as it publicized how much users it was gaining, that got approached by other companies. We learned that google and microsoft tried to buy the company and did not succeed, where facebook it. The price of facebook paid is probably unbeatable, and i dont know that for sure, but another concern that whatsapp founders might have had is the fact that google and microsoft have their own operating system and maybe would have closed the app that can run on every smartphone. And facebook is like that too. The price is like unbeatable. 19 billion, that is hard to beat. What do we know about how this deal actually got done . On the face of it seems like Mark Zuckerberg shaking hands, not asking advice from anyone else. Is that what happens . Happened . Clearly there is more involvement than just that. Mark zuckerberg is very bold. That has been the headline on his willingness to do this deal. Very certain on where he wants to position this company. That leaves him confident enough to try to get these deals done quickly. In the case of facebook and what theyre trying to do and their willingness to say, we can feel go beyond just facebook and have mobile communications dominant by owning different. Latforms, owning instagram if you were to compare the strategy of what a microsoft may have been thinking, its member that microsoft owns skype, which looks pretty reasonable in terms of what they paid versus this deal. Theres a business where they buta consumer end to it, theres a Business Aspect for microsoft. They are able to integrate that into some of their offerings. They already have a messaging app. I dont know how serious microsoft would have been. Mark zuckerberg very serious about growing the mobile communication story of facebook. Speaking of messaging apps, they have taken away 32 and a half Million Dollars away from the carriers already, but there are a lot of people making money on this deal. You cover the venture capitalists tell us about how much sequoia is taking home here, the only investor in whatsapp. What is fascinating about this company is it has really been under the radar until this deal happened. Yesterday when the deal was announced, everyone was surprised, especially in the u. S. , where the application is not as popular as it is in europe. Sequoia had silently invested in the company with an initial round of 8 million in 2011. Than 2me more billion. Billion sequoia is taking away from this. We will consider our conversation about facebook and whatsapp. Im emily chang. You are watching bloomberg west. Day, thestory of the impact on facebook and their competitors. With me is ben thompson. He joins us from taiwan. Inedict evans here with me the studio in san francisco. Im glad to have both of you on this, because you are two of the foremost anchors on what is going on in mobile. Benedict, i have to ask the question about the number. Whatsapp iswhatsapp worth it . Was instagram worth 1 billion or worth 1 of facebook at the time . The question for Mark Zuckerberg is around maintaining share if engagement and share of activity. It is a significant percentage of facebook. Is taking a big chunk of people who should have been using facebook and they are all using facebook first. Do youstion for him was, just sit and try to compete with that . They would be looking at Facebook Messenger or the numbers for that for the last year or two years. Would you say, this is a really great mobile conversation product and should be part of facebook . Looking at the landscape of mobile messaging apps out there, you are in taiwan, you have seen the rise of viber. Do you think this is worth it . I tend to think it is. The price per user is very reasonable. The growth is fantastic. Plateaued. I think its not a great comparison. From that perspective, it is reasonable. The bigger thing that benedict was driving at is, i dont know if theres a price that would be too high. I dont know if that particularly mattered to mark thereberg because he felt was a threat. We saw the same sort of thing with the snatch up thing. Theres this area private messaging that facebook really kind of has a brand to go into. Google are scared to put stuff on facebook that is private. At this point in the game, everything is very expensive. Does it matter that facebook is buying versus building innovation . Not especially. Interesting strands here you can also see with instagram is how difficult it is to fork off these successes in advance. You could have launched 10 apps that look like instagram on a different name. One of them would get to what instagram got. With the other nine, maybe and maybe not. Its hard to overstate the degree of chance and luck in some of these really spectacularly growing businesses. Dynamic is perhaps worth looking at. On the desktop, there are really strong winner take all dynamics around social. When you go to mobile, most of those dynamics fall away. Can get pushhey notifications. All of the friction around using multiple social networks on desktop falls away on mobile. Its kind of messy. Its very messy. The ones that break through the noise and explode try to replicate that again explode, to try to replicate that again is a fools errand. If it is not winner takes all, how many social networks, messaging apps and my managing in the future am i managing in the future . They all build on the phone address book, they all use the phones photo roll. There is still the Network Effect of the best network for me is the one my friends are on. This being seeing is fought out on a country by country basis. Anecdote, my wife only uses line. I have four or five. You are a unique use case. Yes. My whatsapp friends are mostly a broad. I think that is how youre going to see these battles going down. You see these Big Marketing things. Are several different dynamics here. It could play out the way facebook played out. There were local champions the got forced by facebook on the desktop. With instant messaging, there was a local winner in each country. Thats what everyone used, rather than anything specific about the product. When you get your smartphone outofthebox, it already has phone, sms and email. I hesitate to presume there will be one more. If all these guys are doing is unbundling different parts of your social and Communications Experience you can choose. How are you going to speak to your boss . How are you going to speak to this person . Photo on to send a snap chat or post a picture on instagram and tag five friends . There is a systemic plurality of options. Im not necessarily sure its going to collapse into one anymore than the web collapsed into one. One of the ways of looking at what is happening, facebook, it is what happened to yahoo or aol. You go from having strong benefits to having your stuff in one place. Over time there is a gravitational well, a black hole effect that pulls more and more things into it and it collapses under a certain weight. You start saying, i dont have to do all my stuff in one place. I dont have to do all of my web on aol. I know Mark Zuckerberg has insisted it will remain separate. Jan koum has said the same thing. Down the line, does whatsapp change at all . Do they add the dreaded aword . Integrate ando turn this into more of a platform or integrated into facebook overall . I remain separate for the foreseeable future it remains a separate for the foreseeable future. I do think stickers makes a lot of sense. I love stickers. Once you have used them you cannot go back. I do not think you need ads in messaging. Cases. Scinating business you see with line, through. Tickers brands have permission thats a direct channel. Or there are pushing apps, monetizing within the other apps through inapp purchases. There are a lot of ways to monetize through a messaging app. Facebooks monetization is going very well. They have the luxury of continuing to push whatsapp growth and come back to it when they need to. I dont think they need to for quite a while. Benedict, whats the biggest risk that facebook has right now . Theres a case you can make that says that facebook is playing whack a mole. When they bought instagram, a lot of people are saying there is this unbundling problem. They bought instagram, problem solved. That was not the case at all. The same for snapchat, which has passed the volume of facebook. The question is, is the opportunity so big that it doesnt matter that they dont have all of it . 70 t ok for facebook to be of your smartphone socializing activity, spread across a bunch of federated applications, whether it is facebook home or messenger or whatsapp, or the next big thing they buy. The downside might be, they bought instagram and that was a great deal in a Financial Sense that it did not do anything around the positioning and photographs. Spentey bought whatsapp, 19 billion, which brought them 450 million active users. What happens next . Is cannot presume this game over. The elemental thing that is happening in mobile, there are two basic issues. Is the internet with the web, and that was settled in 1994, 1995. When you go to mobile, suddenly you have a massively more complex environment of how people engage. This year, laster is messaging. I cannot give you a reasonable forecast on what i will be doing in my smartphone four or five years from now. Goes back to my question, is it worth paying 19 billion if we do not know in five years if we will still be using it . What if google bought this instead . What if . Twitter had bought instagram, you could argue that twitter would be in a different place now. And facebook might have a different problem. It goes back to the point i made earlier about aggression. The really interesting thing about watching facebook and google now is how aggressive and ruthless they are in reacting to disruption and in jettisoning previous functions about what their business is supposed to be. Thats very different from what Big Internet Companies were doing 10, 15 years ago when they thought, we have won. I think Mark Zuckerberg more than anyone else would say, i have no idea what facebook will be five years from now. Benedict evidence of Andreessen Horowitz, ben thompson of stratechery. We will be back with more. Billion price 19 tag for whatsapp shocked many. Was it a huge surprise to whatsapps competitors . I want to bring in a special roundtable of whatsapp competitors. The cofounder and cto of tango. Whoa whenrybody went this was announced, but what did you guys think . The sheer number of the purchase, when you factor in the rs you rsu for keeping employees. When you divide it by the active number of users its only about 40 a user. When you factor in the growth in the growth and add one million users a day, you are looking at outng them out a few years 20 a user. Youre talking about something realistic in terms of being a good return on investment. One of the reasons it surprised people here was because they have an app used mostly overseas. A lot of people in the u. S. Have not heard of them or use them. I have tried to use it personally, but not enough of my friends here have it. People do communicate with me from abroad. What was your reaction . When you think about it, they half the price of twitter for twice the user base. When you look at the excitement there is around the messaging space, and how about changing the face of social networking, i think they have to make a move. Do you think google is in a bad place, that they did not get this . I dont think google is in a bad place in any way. The first thing you have to remember is that they own android. A lot of these apps are not really possible without that is amentally, android platform and these have the apps. People have aspirations to make bigger platforms. For 900 million. It remains to be seen whether people can build platforms. In five years, he does know what hes going to be using. There has to be some consolidation down the line. What happens to all these messaging competitors if they are not differentiated enough . Dont some of them have to go away . That is the case. Its difficult to compete with Large Networks that have been created and gathered hundreds of millions of users. We will see a handful of dominant players emerge. Think about the communications, att at ts and verizons of the world. End upsame way we will with a variety of players that are coming up the market in this new era of communications. Estimate, i believe messaging services are going to cost the carriers 54 billion. This is one issue that is underplayed. Whatsapp has an application that serves no ads. The question is, who will end up paying for this . The answer will be the carriers, in terms of subsidized Network Plans for their users so they can use whatsapp and facebook to lure in new subscribers. Much of the anticipated motivation of the service will be negotiations with the carriers and facebook. Thanks so much for sharing your perspective with us today. We will be back with more. You are watching bloomberg west. We focus on technology and the future of business. Im emily chang. Judge has blocked streaming tv Company Aerial from operating in several western states. This is not until the u. S. Supreme court takes up a related case in april. Broadcasters have argued that it is stealing tv signals without paying. Aereo maintains its antenna should be treated the same as individual antennas. Htc has plans to unveil the first of three wearable devices next week. A smart watch prototype a sonic wall, device will be previewed exclusively in barcelona next week. Htc is developing a watch that plays music. The winkle box brothers, famous for their legal battle with Mark Zuckerberg, announced a financial index for bitcoin. Provide a regularly updated figure for the price of the virtual currency. The news was announced in a regulatory filing. The big story were following today is facebook buying whatsapp in a deal valued at as much as 19 billion. Whatsapp is just one of many new apps and social media tools that allows people to connect around the world. Someone who knows what the power , theese technologies is chief Technology Officer for obama, helping build a team of developers from Tech Companies like twitter, google and facebook. They use big data and social media to help president obamas reelection in 2012. Harper is now the ceo of the Financial Tech Company that connects retailers with mobile buyers, and mobile briars buyers with the products they want. I have to ask you about this whatsapp story. In washington, how do people there use whatsapp, viber, snapchat, instagram . Is a greathis technology for trying to interact with the constituents. Theres a lot of excitement about, how do you connect with people. Something that is something we try to do on the campaign. Would thing we have learned is how quickly the social media landscape changes. Do with theou president if you were involved with him in 2016 or the next candidate . That iss a lot changing the landscape of tech right now. With the emergence of line and , messaging has been taken off the big platforms and now put back onto one of the big platforms. Really interesting aspect of privacy and control. Some people are very interested in trying to solve this. Im excited to see what happens in 2016, and will the same things we did in 2012 with social work . Will people be more skeptical . For instance, with email targeting and whatnot. Is privacy a fair expectation at this point . I think it is a fair expectation. But i also think that many people dont really care about it in the same way that people who are thinking about it academically care about it. I worry that between those two is where we will have a problem. It is an expectation that is fair. Zuckerbergsrk biggest ambition has been to connect the world and now hes trying to bring Internet Access to everyone in the world. How does Something Like whatsapp further those objectives, the more political objectives we have seen from him when it comes to internet. Org and forward u. S. And immigration . I think this is the most important part of the whatsapp acquisition. When you think about, especially on feature phones, or the platforms that are not necessarily supported by the regular chat applications, this is a great way to hit the people who dont have the privilege we have in the u. S. With Internet Access and give them an opportunity to communicate with their friends and peers, etc. From there, being able to push the messaging to them from brands, etc. I know we keep talking about ads, will ads go there. I dont know if that matters as much as making sure it continues to work. We have seen some great examples of washington using technology, for example in the 2012 president ial campaign. What about the examples where they have used it poorly, when it comes to healthcare. Gov . What is a going to take for washington to catch up . It going to take for washington to catch up . That is a very nuanced question. Healthcare. Gov is not an example of washington using technology poorly, it is just a large product that is very difficult. We have to it is everyone have to Pay Attention to what the cutting edge is and really listen to the users on what they want. One of the things i worry is that in 2016 if we follow the playbook from 2012 we will fail. We constantly have to have our ears to the ground. Good answer for why or how we can make sure they do things better, they being washington. I know by just talking about it in continu