Most of planet Earth’s population heard the news last week that Facebook bought a startup mobile phone texting service and paid an unbelievable $19 billion for a business that generates revenues of approximately $300 million. The texting service in question is Whatsapp – an extremely popular messaging service that is globally appealing because (a) it is free and (b) it can be used across the majority (if not all) of smart phones.
The WhatsApp acquisition shows Facebook’s determination to follow the road not yet paved. It is a bold move, filled with peril along the way. But that’s the right course if you measure the number of potential users in the world rather than the cost of acquiring each user and the potential for selling ads to each user today.
Alternatively, there are those who view it as a massively overpriced transaction:
But the acquisition price for WhatsApp is very high compared to the value it could extract, and will lead to substantial dilution for Facebook’s existing shareholders.
One of the world’s most famous investors, Mr Warren Buffett, said that “price is what you pay, value is what you get”. Only time will tell whether or not Facebook derives any value from their acquisition of Whatsapp.
Similar to the Facebook Whatsapp transaction news, there was much wailing and gnashing of teeth when Manchester United announced that their sometimes star striker, Wayne Rooney, had signed a new contract believed to reward him with an eye-watering 300,000 per week.
The news of this new contract has divided opinion strongly not only among the Manchester United supporter base, but across a wider audience of people (some of whom don’t even follow football). For some people, the deal is a great thing as Manchester United have managed to retain the services of one of their star players. There are those who are not dismayed at the magnitude of the salary as just illustrates that the anger is misdirected at Rooney when it should be directed at his paymasters.
Sections of football fans and pundits are unhappy that Rooney has managed to secure a large pay rise, but his performances are so inconsistent that he does not deserve it – comparisons are inevitably made to Cristiano Ronaldo, Leo Messi or Zlatan Ibrahimovich as examples of players who possibly deserve similar contracts. For others, there is a great deal of dismay at the payment of such a huge salary to a “guy who just plays football” and there are better uses for that money – the most common being that a significant number of nurses or soldiers could have been paid. The implication being that football is a frivolous pastime.
One of the biggest criticisms of Rooney, however, is that he does not appear to have shown loyalty to the club. For certain supporters there is a feeling that Rooney does not deserve to be placed on such a pedestal by Manchester United.
Does Wayne Rooney deserve his new contract? Once again, I defer to the wisdom of Mr Buffett
Price is what you pay, value is what you get.
Manchester United have paid a great price to retain Rooney’s services, but only time will tell if they get value from him.