Tag Archives: WhatsApp

The biggest IPO in history

I have been dealing with Alibaba for many years now, but for many other people, Alibaba is an unknown company. Alibaba is the unmatched e-commerce market leader in China. It holds about 95% of China`s C2C market (Taobao division) and more than 50% of the B2C market (Tmall division).

alibaba logo

Alibaba is set to trade under the new ticker symbol on NYSE; BABA, on friday, September 19th. I think that many will be shocked by Alibaba`s entrence in the West, because only a few investors have heard of the company.

Alibaba`s business is more profitable than Amazon and eBay put together, and the U.S`s dominance in the e-commerce sector is poised to fall with the air apparent to Amazon set to IPO. Alibaba`s IPO may herald the end of U.S E-commerce dominance.

When Alibaba enters the market in the West, the competition will increase and standardize prices around the world, which means Apple Inc can`t sell their iPhone 6 for one price in Europe and another in the U.S.

Ebay didn`t have chance to compete with Alibaba, so the decided to stop their business in China. Jack Ma said it was primarily because they wasn`t effective enough and couldn`t deliver so fast as Alibaba does.

Jack Ma is a great business man. In a letter to his shareholders he said in it, this single sentence about Alibaba`s culture, may revolutionize the way other companies do business. «I have said on numerous occasions that we will put customers first, employees second, and shareholders third».

Don`t forget those words by William Feater: The primary asset of any business is its organization, but as you already know; the customer is the God. Without any customers, you are completely dead. So, what will happen to Amazon and eBay`s customers is the big question now. Price and service are key factors now.

For every dollar in sales, Alibaba makes $0,43 in gross profit. In contrast, Amazon only manage to squeeze just $0,01 gross profit for every dollar in sales. Operating income in the three months ended June, was 42% more than the combined profit of Amazon and eBay for the same period.

Many people talk about bubbles, but this is not like what we saw in the dot-com boom in the late 90`s. Take a look at these Chinese companies which is not revenue-starved; Alibaba founded in 1999, Q2 2014: $2,54 billion in revenue. Up 46% Y/Y. Valuation; $155 billion.

Tencent founded in 1998, Q2 2014; $3,21 billion in revenue. Up 37% Y/Y, and last but not least; Baidu which is founded in 2000. Q2 2014: $1,93 billion in revenue. Up 58,8% Y/Y. This the best tech companies in China and all those three founders are the three richest in China, with Jack Ma on the top.

Ebay is out of the market in China along with Google, which was very profitable for Baidu. Of course the Chinese government is supporting their own companies, so it is not easy for the companies in the West to penetrate the Asian markets. It`s hard to say how well Baidu would be doing if Google hadn`t pulled out of China in 2010.

A report from China Internet Network Information Center said in June that China had 632 million Internet users and 527 million mobile Internet users. This is about the numbers of China`s middle class.

It is expected that this number of middle class in China will grow by 500 million over the next decade, and reach a whopping three billion by 2030, which mean a huge market for many start-ups in the west, but the big question is the Chinese government.

They have a habit of favoring state-owned or state-connected companies. An Internet startup with total potential revenues of $10 million in the U.S might achieve revenues of ten times more in Asia. It can be lucrative to expand in Asia, but sometimes not so easy.

WhatsApp is popular in Hong Kong, but WeChat dominates in China. Kakao Talk is the big thing in Korea, while the most popular chat app in Japan is Line. As you may know; Asia is not only China. What might work in China can be a flop in Korea, Japan, Singapore or Hong Kong.

Alibaba will change the Chinese corporate giant`s diverse range of business lines, from e-commerce marketplaces to logistics to financial services. A overseas IPO could prompt the firm to reassess its strategy for these business categories as well as the countries where it operates.

The West are protecting their companies just like the Chinese government. It was not so easy for Baidu, VIPShop or Youku Tudou in the overseas markets like the U.S, as they all are focused on the Chinese market. But Baidu is a search engine, while Alibaba is something different. Peope want to buy things cheap and Alibaba can fix that.

As Jack Ma said; «China is the main course, while developed markets like the U.S are merely dessert».

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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Who is Jan Koum?

 

Jan Koum is born in Kiev, Ukraine on February 24, 1976. He is an American internet entrepreneur and computer engineer. He founded WhatsApp together with Brian Acton and are the 6th richest billionaires in the world under the age of 40.

whatsapp logo

He earned most of the money while they sold WhatsApp to Mark Zuckerberg`s Facbook in February this year for $19 billion. Koum is Jewish and grew up in Fastiv, outside Kiev in Ukraine. He moved to Mountain View, California in 1992.

 

Koum moved with his mother and grandmother to California where a social support program helped them to get a small two bedroom apartment at the age of 16. His father intended to join the family later, but finally remained in Ukraine.

 

He started to work as a cleaner at a grocery, while his mother worked as a babysitter, but at the age of 18 he became interested in programming. He enrolled at San Jose State University and simultaneously worked at Ernst & Young as a security tester

 

Jan Koum was part of a group of hackers called w00w00, where he met the future founders of Napster Shawn Fanning and Jordan Ritter. Jan Koum and Brian Acton worked at Yahoo in nine years. In September 2007 the both left Yahoo and took a year off.

 

Both applied and failed, to work at Facebook. In January 2009, Koum bought an iPhone and saw opportunities in the new app industry. He visited his friend Alex Fishman and they talked for hours about Koum`s idea for an app.

 

A week later Koum started WhatsApp on his birthday, February 24, 2009. Now, you all know that the WhatsApp baby is worth $19 billion. On February 19, 2014, Facebook Inc announced it is acquiring WhatsApp.

 

Facebook paid $4 billion in cash, $12 billion in Facebook shares and $3 billion in restricted stock units to be granted to WhatsApp founders and employees that will vest over four years. Jan Koum is the CEO in WhatsApp.

 

As of April 22, 2014, WhatsApp had over 500 million monthly active users (MAU), 700 million photos and 100 million videos are shared each day, and the messaging system handles more than 10 billion messages each day.

 

As of May 2014, WhatsApp has crossed 50 million MAU`s in India, which is also its largest country by the numbers of MAU`s. WhatsApp Messenger is a proprietary, cross-platform instant messaging subscription service for smartphones that uses the internet for communication.

 

Facebook paid $19 billion, which is $42 per user. A week before the WhatsApp deal, Japan`s Rakuten bought Viber for $900 million. They claims to have 280 million users, which is $3,21 per user.

 

Some investors say Facebook paid too much for WhatsApp, while others say WhatsApp could be worth $100 billion. WhatsApp`s users are worth $42, while Viber`s users are worth $9, and Line`s are worth $73. WeChat`s users are worth $231 per MAU.

 

If you only sell ads, I think that an international user is worth less than a Western user. I really look forward to see what the right valuation for these apps are in the future. Anyway; A great story!

 

Reports today:

 

08:30 a.m EST Core CPI m/m

08:30 a.m EST Unemployment Claims

08:30 a.m EST CPI m/m

08:30 a.m EST Empire State Manufacturing Index

09:00 a.m EST TIC Long-Term Purchases

09:15 a.m EST Capacity Utilization Rate

09:15 a.m EST Industrial Production m/m

10:00 a.m EST Philly Fed Manufacturing Index

10:00 a.m EST Mortgage Delinquencies

10:00 a.m EST NAHB Housing Market Index

10:30 a.m EST Natural Gas Storage

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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Chat battle

 

China`s largest listed internet company Tencent posted its slowest quarterly profit growth in two years. They have spent a lot of money to promote its mobile messaging app called WeChat and other e-commerce sites in competition with Alibaba Group. Marketing expenses is up 39% from the third quarter.

WeChat

Tencent is a third owned by South African e-commerce and media company Naspers and they plan a 5 for 1 split share on the company. This will take place from May 15. Tencent`s share price has more than doubled in the past years and their market cap is $138,7 billion.

Tencent gave an indication of WeChat revenue figures for the first time as it transforms from a massaging service to fully fledged mobile platform. WeChat is more than a chat platform. It`s everything from social networking and gaming to personal finance and booking taxis.

WeChat Q4 revenues is between 200-300 mln yuan ($32 – 49 million). Tencent`s President Martin Lau said last week that the WeChat and Mobile QQ together generated gaming sales of more than 600 million yuan in three months to Dec 31. The groups revenue is 16,97 billion yuan in total revenue for the quarter.

Line Corp from Japan is another competitor and they announced 2013 revenues of 34,3 billion yen ($338,38 million), making it last year`s top-earning non-gaming smart phone app. WeChat is worth about $64 billion.

The multiple uses of this app called WeChat offer far greater earnings potential than Facebook`s WhatsApp, which is «worth» $19 billion. 70% of the WeChat`s revenue comes from gaming and subscriptions and online ad sales rose 58% to RMB 1,5B. E-commerce transaction revenue nearly doubled to RMB 3,3B.

Tencent is fighting against the e-commerce giant Alibaba in mobile-based retail services and both groups recently announced plans to launch virtual credit cards using QR codes that function in a similar way to bar codes scanned by smartphones to process payments.

Those two groups has attacked China`s traditional banking sector and the central bank is considering regulations to limit the use of third-party payment systems offered by Tencent and Alibaba Group.

Tencent`s mobile massaging platform is dominant in China (totaled 355M, +6% Q/Q and 12% Y/Y. ). globally MAU`s for WeChat rose 5,7% in the fourth quarter to 355 million with a net income of 3,91 billion yuan ($631M) on revenues. Up 40% at 16,97 billion yuan ($2,74B).

WeChat`s MAU is nearly 3 times that of Sina`s Weibo, and 24% smaller than WhatsApp`s 465M (as of February). MAU`s for Qzone social networking platform rose 4% Y/Y to 625M. Instant messaging MAU`s rose only 1% to 808M.

A month after Facebook spent $19B on WhatsApp, Alibaba (ABABA) is investing $215M into messaging/VoIP app Tango at a $1,1B valuation. Tango and BBM are close to each other in scale. WhatsApp claims a market-leading MAU of 465M. Tango claims 70M.

BlackBerry`s John Sims disclosed BBM`s base had grown to 85M MAU`s since the launch last fall. The Tango deal is only one of many investments made by Alibaba which is trying to grow their Web/mobile empire.

To compare: Renren (RENN) is declining and is headed for a fall of 40 – 45% drop. Online game revenue fell 39,6% in Q4 to $15,6M after dropping 17% in Q3. Ad revenue pressured by share losses to social media rivals such as Tencent and Sina, fell 17,9% to $10,2M after falling 11% in Q3. Monthly unique logins fell to 45M in December from 50M in September.

Sina surges on Weibo IPO news and Alibaba is spending $805M to buy a 60% stake in ChinaVision Media. A Hong Kong based producer of films and TV dramas. Youku (YOKU) remains the market`s biggest player on the fragmented online/mobile video market.

Strong competition is provided by Baidu, Sohu and Tencent. Alibaba, Baidu and Tencent have been constantly finding ways to encroach on each others turf. Tencent bought a 15% stake in #2 Chinese e-commerce firm JD.com. What a battle!

Yelp has been a hot stock and some investors say these stocks are «momentum monsters», and now you have the chance to get into a new IPO of the Facebooks game developer called Candy Crush. Wall Street is planning on selling 22 million shares. A valuation of $7,6 billion! Candy Crush made $159 million in 2013! Wow!

Reports today:

09:00 AM ET S&P/CS Composite 20 HPI y/y
10:00 AM ET CB Consumer Confidence
10:00 AM ET New Home Sales
07:00 PM ET FOMC Member Plosser Speaks

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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Online traffic

Some people do not understand how WhatsApp can be worth $19 billion, but CEO Mark Zuckerberg say it is worth more than that. How is that possible? What do Mr Zuckerberg see that others don`t see?

Facebook whatsapp

The revenue in WhatsApp is $20 million (2013), which means Facebook has paid 950 times the revenue. This means that Facebook is paying $42 per WhatsApp user. The Facebook value per user is $170. Facebook’s revenue per user (ARPU) is $6,73, while WhatsApp generates $1 per user annually after one year free subscription.

 

This deal gives WhatsApp the same valuations as Gap Inc, and half of the value of Twitter Inc. Half-a-billion people are using WhatsApp for messaging and, and the engagement of the app is huge on mobile by far.

 

It seems like Facebook’s goal is to collect as much people as they can on a few mobile and tablet apps. As long as they have billions of people engaged in their apps, they will be attractive to marketers which is paying their wages.

 

WhatsApp have low revenues today, but Mr Zuckerberg say it would be worth more in the future. This is a strategic value. He saw a huge business potential to double its users and its fit with Facebook. In addition; Mr Zuckerberg are seeking more phone companies as partners to connect the people.

 

It sounds like Nokia`s vision: «connecting people». Nokia was the worlds nr.1 mobile company. As you already know, the wind changed, and you know the history of Steve Job`s fantastic company Apple. The world`s biggest company!

 

It`s difficult for some people to see why they should use WhatsApp. There are so many alternatives out there, and they have been there for many years. I personally do not use WhatsApp. I don`t know other people who use it either.

 

I spend many hours on skype every week. Everyone I know from China use skype and its free. WhatsApp is free only the first year, and then it cost $99 cent. Why should people around the world use WhatsApp and pay for it when others like Skype is for free?

 

The trend now is that the mobile operators don`t sell SMS or phone calls anymore. Its free! How do they earn money? They sell online traffic. That`s the new product. Come on Facebook. Come on Mark Zuckerberg; this is not innovation! But if everyone use WhatsApp in the future; I have no choice.

 

Reports today:

 

09:00 AM ET S&P Case Shiller HPI
10:00 AM ET Consumer Confidence

 

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