Every company has a story. Learn the playbooks that built the world’s greatest companies — and how you can apply them as a founder, operator, or investor.



Wed, 29 Jan 2020 04:48

We kick off Season 6 with a long-awaited Acquired Classic: Facebook’s $22B purchase of WhatsApp in 2014, which still ranks as the largest acquisition of a private VC-backed startup in history. Yet despite that enormous pricetag and all its associated fanfare, as we sit here 5+ years later WhatsApp actually generates LESS revenue than the meager ~$20m it was bringing in at the time of acquisition. Was this this worst acquisition of all-time, or a brilliant strategic chess move by Mark Zuckerberg & co? Tune in as we render Acquired’s judgement!

Note: Unfortunately David’s audio quality in this episode was impacted by a technical glitch which we didn’t discover until after recording. Our editors worked super hard to fix in post-production, but it’s still not totally perfect. We hope you’ll give it a listen regardless, and we’re working on getting a transcript made ASAP, which we’ll post to the website when it’s ready. Thanks for bearing with us,

-Ben & David

Carve Outs:


Listen to Episode

Copyright © Copyright 2022 ACQ, LLC

Read Episode Transcript

I do have to say that based on all the other companies we analyze, I was expecting to see Gross Margin highlighted in their financials and talked about in the presentation. But Facebook's actual operating margin is so good that that is what shows up everywhere because they actually make money and they make a ton of it. It's like a dramatic departure from a lot of episodes we've done in the last year. So that's insane. I mean, the way that, like, think about that stat is, like, for every dollar they bring in house, they keep 45 cents even after paying for everything. All their fixed costs, all their employees. It's just a cash machine. Yeah. That's why it's a $630 billion market cap company. Yep. Welcome to season six, episode one of acquired. The podcast about great technology companies and the stories behind them. I'm Ben Gilbert. David Rezenthal. And we are your hosts. Today, we are talking about WhatsApp, an app that Facebook paid $22 billion for and has done virtually nothing in this six years since. And in fact, it was reported last week. They are, that's right, David, abandoning near-term efforts to enable advertising in WhatsApp, which, of course, is Facebook's core business model. So it just, you said $22 billion, right? Billion. Just to make sure we're on the same page. That's right. That's 22 Instagrams right there. So today, we will decide was this one of the worst acquisitions of all time, or did Facebook make a genius move, even for this insanely, insanely high cost? I'm super looking forward both to telling this story because it's an amazing story. But also to debating that question, because, you know, I think they're really good arguments to be made on both sides. This is as classic as a classic acquired episode gets. We have more than five years of hindsight. We've got a big price tag. We had lots of reporting around the time of the sale and, frankly, not a ton of follow-up sense. So it's going to be fun to tell the WhatsApp story from the very beginning. And as you said, debate that very question. Our presenting sponsor for this episode is not a sponsor, but another podcast that we love and want to recommend called the Founders Podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and Founders. So we knew there's a natural fit. We know the host of Founders. Well, David Senra, hi, David. Hey, Ben. Hey, David. Thank you for joining us. Thank you for having me. I like how they group us together. And then they say it's like the best curriculum for Founders and Executives. It really is. We use your show for research a lot. I listened to your episode of the story of Achaomarita before we did our Sony episodes this incredible primer. You know, he's actually a good example of why people listen to Founders and to acquired because all of history's greatest entrepreneurs and investors, they had deep historical knowledge about the work that came before them. So like the founder of Sony, who did he influence? Steve Jobs talked about him over and over again if you do the research to him. But I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired. We focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of Founders. Listeners, the other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David, it was the third, fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion, the greatest such a printer to ever do it, my favorite entrepreneur personally is Steve Jobs. And if you go back and listen to like a 20 year old Steve Jobs, he's talking about Edwin Land's my hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes. And the beauty of this is the people may die, but the ideas never do. And so Edwin Land had passed away way before the apex of Apple, but Steve was still able to use those ideas. And now he's gone and we can use his ideas. And so I think what acquired is doing what a founder trying to do as well is find the best ideas in history and push them down to generations. Make sure they're not lost history. I love that. Well, listeners, go check out the founders podcast after this episode. You can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders, go check it out. If you're a fan of the show and you want to go deeper on company building topics, the nitty gritty of how companies today are solving problems in real time, you should consider becoming an acquired limited partner. In recent episodes, we interviewed the founder of fast growing Chicago startup cameo and we did another episode that turns the tables and interviewed us on the business strategy behind acquired. You can get started with a seven day free trial and listen right here in the podcast player of your choice by clicking the link in the show notes or going to slash acquired. David, I think it is time to dive in. Let's dive in. You know, there's something funny about messaging apps, just thinking, look in at our script here and where we're going to start and how we started the Slack episode with Dharma Butterfield soon to become store butterfield. How do commune up on a commune in British Columbia? There's something about communism and messaging apps. I don't know what it is, but it just makes for it's a really good breeding ground for founders of messaging apps. And of course, strong community. That's strong community. So of course, I'm referring to we are going to start in the mid 1970s in the Soviet Union in Ukraine in a little village just outside of Kiev where a boy named Jan Kuhn is born to a Jewish family in 1976 in this village in the then Soviet Union. And this is a pretty not great time to be all of those things. A Jewish child in Ukraine in the Soviet Union under communism in the mid 1970s and Jan actually kind of later talks about this and he says he says of his time in the school he attended there. It was so rundown that our school didn't even have an inside bathroom. Imagine the Ukrainian winter negative 20 degrees Celsius where little kids have to stroll across the parking lot to use the bathroom. Society was extremely close off. You can read 1984, of course the book, 1984, but living there was experiencing it. I didn't own my own computer until I was 19, but I did have an abacus. That was the reality that this young man, Jan Kuhn, was growing up in and he would stay in Ukraine until he was 16 years old and this would have just such an impact on everything that's to come. His dad worked for a state run construction company in the village. It was really hard and it was a very anti-Semitic environment. Finally by the time Jan was 16, his mother and his grandmother and he were able to escape. This is in 1992. The Berlin Wall had fallen at this point. They were able to get out of the country and come to America. So the three of them moved to Mountain View, California. Jan is 16 years old. He barely speaks any English. When they arrive, his mom starts working as a nanny to support the family. It's not enough. They live in government assisted housing in Mountain View. They're on food stamps. Jan's dad never is able to leave the Ukraine. He very sadly passes away in 1997. Never comes to America. Even more tragically a few years after that in 2000, we're going to talk much more about what happens before the year 2000. Jan's mom is diagnosed with cancer and passes away in 2000. Here's this guy. Now at the end of the day and the end of this story, Jan walks away with nearly $7 billion after taxes from the WhatsApp sale. His life was, this man has been through a lot. No kidding. I think you opened that chapter with saying it was a pretty not great time. It was a very soft way to describe a very hard existence. So when he comes to America, because he doesn't speak much English, he rolls in American high school in California. He doesn't get along with the other kids there. He's had a lot of trauma in his life. He's got this kind of one thing that sort of ends up becoming a light in his life. That he's in Silicon Valley. This is the mid-90s. He gets really into computers. He actually teaches himself programming and like computer like networking by purchasing manuals from a used bookstore, a local used bookstore, and reading through them, teaching himself, probably working on the school computers, learning out of program, and then returning them to the store and getting the money back after he's done. He ends up kind of through this. He joins while he's still in high school, a hacker group online called WUWUWW, W-00W-00. He leads WUWUW. He ends up meeting after co-founder Sean Fanning through that and he kind of finds his community on the internet. After high school and through all this, he enrolls in San Jose State University in college. But college is kind of not for him. He ends up dropping out. He first takes a job begging groceries. Then he ends up working at Fry's electronics. If you hung out in Silicon Valley, I remember when I was at GSB at Stanford, there's still like, well, now in 2020, I don't know. When I was at GSB, there's still a Fry's electronics on El Camino Real in Palo Alto. Jan works there. Then from there, he ends up working at a early internet service provider at local ISP. Through that, then he ends up joining Ernst and Jan as a computer security penetration tester. So he's putting all of his hacker cred to use, even though he's a college dropout. White hat. Yeah. Uncleared. White hat by day. Uncleared what Jan was doing at night. This is where kind of everything changes. So he goes to a conference while he's with Ernst and Jan. And at the conference, this is now kind of mid-90s. He meets Yahoo co-founder David Filo. He's at an Apache security conference. They kind of hit it off. And David's like, hey, when we get back to California, why don't you come into Yahoo and interview for a job? So Jan does. He ends up joining Yahoo as an infrastructure engineer, becomes a real engineer. And he meets in his group when he joins a man who ends up, I think, first becoming a mentor figure and then a deep friend named Brian Acton. Who is Brian? Brian has kind of not quite as dramatic, but equally really interesting story. Brian was born in Michigan in 1972. I believe his parents may have divorced when he was quite young. He was mostly raised by his mom who ran her own freight forwarding business. Kind of incredible. Like this woman, you know, with a child just like running a freight forwarding business. I would imagine not a super female friendly business in those days. Not the venture capital darling that freight forwarding is today. Yeah, this is way pre-convoy. And and pre flex port. What's the flex port? Yeah. She then moves him to Florida and he spends most of his growing up years in central Florida, I believe. She instills in him kind of the seat does of like both entrepreneurship and like small business entrepreneurship, but also like huge responsibilities of like beating payroll and like scraping by and getting you know, getting through months to month. He ends up he's super bright. He ends up going to Penn on a full scholarship to study engineering. While he's there and he's learning about engineering in this freshman year, he first, you know, here's kind of about Silicon Valley and about this, you know, university called Stanford. He probably like heard of you of Stanford before, but like, you know, him and his background in the nobody in Florida was thinking about going to Stanford. He ends up applying to transfer and has accepted, into Stanford and transferred out to California, his sophomore year and majors ends up majoring in computer science at Stanford. This ends up being huge for him. He interns at Apple his junior year and then after graduation, he joins Yahoo as employee number 44 in the really early days. And he works super closely with David Filo. He works with Chilu and like all these like super legendary engineering leaders that end up coming out of Yahoo because in a lot of ways, you know, Yahoo was the first, we haven't really covered it enough on this show yet, but it was the first like successful successful, well, well, Internet company. Yeah. Right. Internet directory basically. It's funny. Yeah. You mentioned Chilu. So Chih obviously is very notable for his work at Yahoo. My mega skip level boss from Microsoft when he ran Bing because Microsoft recruited him over and he ran search for Microsoft and then ultimately actually took over all of office as well. And of course, you know, the relationship between Yahoo and Microsoft, many of our listeners probably know is really long and complicated, a topic for another day. But Brian and Yann kind of come kind of spirit when Yann joins Yahoo and Brian really rises through the ranks. He ends up becoming the chief architect of project Panama within Yahoo, which was super, you know, they would talk about it on their earnings calls. I remember Carol Bartson talking about it all the time and then Marissa Mayer after she became CEO and that was a massive project to rearchitect all of the back end of how Yahoo search worked and how ads worked on Yahoo search. So the two of them with Brian kind of leading on the technical side go through this experience of re-architecting at massive scale, this, you know, original internet company. But doing it for like while this company is going from, you know, over a hundred billion dollar market cap, darling of Silicon Valley all the way down to below 10 and they're just plummeting. And what did they, what a prize and ultimately buy Yahoo for? I think it was like three billion dollars or something. I don't know, but the, yeah, if you're final resting places at Verizon, then yeah, it's sort of irrelevant where final market cap was. So they get this incredible technical experience, but they also see like this business model of portal that Yahoo is like it's so fickle and it's so dependent on user attention and it's so dependent on advertising. And they start to believe that Yahoo makes a ton of product compromises in service of their ad partners and that that was a big reason. You know, they simultaneously through these years see the rise of Google and you know, Google famously is just like that these days just one white page with a search box on it. Meanwhile, Yahoo's throwing up all of these display ads and doing all this stuff and they become super, super disillusioned with it. And you bring up an important point there. Yahoo was the very first internet company that's business model was to monetize attention. I don't need to paint the picture for listeners that the most successful company to ever be on the internet and monetize attention is Facebook. And so I think there's this sort of incredible book ending of the story. Well, and that's where I was going to be going with it and it's also during this time famously that Yahoo tries to acquire Facebook for a billion dollars. Mark cried in the bathroom after rejecting it. I think so. I think so. Yeah. And you know, this is going to be a meta theme of this episode. But like this idea of monetizing attention through advertising is in many ways this old is the internet itself. Yahoo was the first big company that was built to do that. And Facebook is the new Yahoo in so many ways. So they get so disillusioned. I don't know if this is still the case on on Yann's LinkedIn. But when he was leaving Yahoo and then the first couple of years of WhatsApp, he described his last three years at Yahoo, you know, his sort of like description on LinkedIn of your role of boy did did some work period. And of course, they were working on project Panama in November of 2007. Brian and Yann have finally kind of had enough and they both leave right at the same. I think it may have been in the same day that they leave Yahoo. And they're just like completely burned out. They both decide they're going to take a bunch of time off. Brian had recently been through a divorce. You know, and Yann had such a hard life up into that point lost his parents in the past few years. So they say, you know, we have enough savings. We got into Yahoo, especially Brian early enough that they can afford to just really take extended time off and travel. And at one point after they get pretty bored, they both, this is famously end up applying for jobs at Facebook, which is of course on the rise now. We're in 2008 and they are both rejected for jobs at Facebook. Brian even tweets about it. Facebook clearly does not need their talents or ideas. Yeah. Which is so funny because like they are especially Brian, but both of them especially Brian like truly world class engineers. There's a thing though that was going on at Facebook at that time that I think a lot of people forget about not that the company is benevolent now, but whereas Google was hiring a lot of the smartest people who were academic and sort of obsessed with really like pedigree. Right. And really like deep nerdy academic sort of learning. Facebook was obsessed with hiring a lot of people who were well known in the communities of the languages that they wrote in and so they had many of the early sort of python people. They had a lot of sort of open source leaders. And frankly, there was a lot of like, there was a lot of not invented here sort of syndrome and there was a lot of you're not good enough for us. And we are sort of, there was a cockiness that permeated I think the development organization at that company early on that it's not surprising that someone really accomplished but who may have been of a different stripe or tribe was was, you know, not, not welcomed and not revered. It's really interesting. I wasn't going to get into this in a history in fact, but it's worth a worth of pause. Most of the back end of WhatsApp ends up getting written in early, which is like this super obscure programming language that was actually developed by Ericsson in like the 80s, maybe Ericsson the big telecom, the Nordic telecom giant as like just purely for telecom use cases for like, you know, rapid messaging but like was super looked at as like this is backwater outdated old school like, you know, this is about as far away from go as it gets. And of course now if you start your company and write it in Erlang, like now you have two problems, the problem that you're trying to solve for your company and the problem that you can't recruit any engineers. Can't recruit any engineers exactly. There's tons of engineers that are specifically obsessed with things like Erlang and Rust and very like more up and coming and or fringe programming languages, but gosh, you have to get specific then and you're hiring when you make a decision like that. Yeah. So, okay, back to picking up the story. Jan, he's single, he's traveling around and remembering about this history of he was a hacker. He was, you know, a woo woo member and it started as a, as a pen test there. He is traveling around the lots of countries and he has a Nokia candy bar phone that he loves. He really loved the old, he still talks about how he loves the old Nokia phones. You could play snake. It was great. And he had of course jailbroken this phone and installed all sorts of like super hacker, you know, dev tools on it that you can monitor everything that's going on on the network and all this stuff. So, he's like obsessively learning about all of these different telecom networks in the country he's traveling to and he would buy different SIM cards, you know, in all the countries that swap them in. But even like Jan is as techie and confident as it gets, he's basically a walking IT department. He still is having a nightmare trying to communicate with his friends back home and all around the world via SMS and phone too, like all these country codes you've got to dial. You send off an SMS. You have no idea if it was delivered, even if you did everything right, it might drop and fall through. And so he's especially when he's he talks a lot about Argentina. He does a trip to Argentina and for some reason he thinks that the country code in Argentina is just like so ridiculous that he's like dropping all of these messages and he starts getting really fed up and like he wants his friends to know back home what he's doing, that he's okay and everything. So he finally comes back in January of 2009. His birthday is in February, but he's just hanging out and he says, you know what, I'm going to buy myself an early birthday present. I'm going to buy an iPhone just to like hack around with. And of course the iPhone had come out in 2007, but 2009. I think this would have been the iPhone 3G. I'm in the 3G or the 3DS. I think probably the 3G. Yes, at this point. I think July is when the 3GS came out, if memory serves. So maybe it was the 3D. But Apple had just, I believe it was in January of 2009. They had just announced the SDK to allow developers to make apps. And I think it wasn't even like apps weren't the app store wasn't going to ship until the summer, but the SDK was out there. Yeah. I think that's right. I think it may have been earlier, may have been at WDC08, they announced it, but yeah, I don't think it had shipped yet or it was shipping right around that time, but the SDK came out with iPhone OS 2. Yep. And so yeah, of course, it's like, okay, great. I'm going to hack around on this. So he's got all this stuff swirling and he has an idea and he tells a friend of his who's also a, I believe it's Russian immigrant in San Jose and Alex Fishman, who is a good buddy of Yanns. Hey, you know, I've had this problem. I have an idea. Remember like, you know, aim and I see Q and all these messaging services on desktop. They all have these, you know, the away messages. What I really want and what I would love when I was in Argentina and all these other countries is that I could just throw up the equivalent of an away message and all my friends could know what I was doing and that I was okay. I'm just going to build this out on the new, this new iPhone that I got. And Alex was like, yeah, that seems like a good idea. And so Yann starts hacking on it. He starts thinking about what to do and he says, you know, really like what I want this to solve is you're, but he asking like, what's up? I just want, you know, this to be like the answer to what's up. So I'm just going to call it what's up. And Alex is like, yeah, great idea. And so Yanns thinking some more and he says, you know, okay, well, two things. One, aim and I see Q and all these messaging services on the desktop. There's kind of this issue with them, which is you have a cold start problem with the network. You know, you join, but none of your friends are on there. And so you got to convince people to go, it's all their friends to join. But with phones, you know, I'm really I'm digging into the, this new iPhone, what was even called iOS, yet at this point, right? It was like, I forget what Apple is iPhone OS SDK. And it's pretty locked down, but there's one feature that Apple lets developers access. And that's the address book, the contacts. What if instead of at the time there was no special permission prompting for that. Absolutely. You just access it. Reach your hand into the cookie jar. And he's like, man, what do you think if instead of having, you know, screen names and user names, we just use phone numbers because all of the phone numbers that people you have, you're only going to give your phone number to somebody you really want to communicate with and you'd want them to know, you know, what your status is. So this might solve that cold start problem. And so I was like, yeah, that, that seems good. But you know, there's one thing you're going to need. Like, John, like your great developer, you need to work to, yeah, who and everything. But you don't really know how to, I know, code for iOS, but it just so happens. You don't know this archaic thing called objective C. Yeah. It was written that next to that Apple has decided to carry forward into all their products to date. I know. So ridiculous. That like next is the, you know, core of objective C and, and so it's still still one of the greatest acquisitions of all time. So they'll have to go on our forthcoming card top 10 list. Yeah. Wait, so before you get into hiring the iOS, did they grow by texting all of your friends? Like, did they, did they reach in, grab the phone numbers out of your address book and then like carpet bomb or how did that go? That's a good question. I don't believe so. I didn't find anything that they did. Like the LinkedIn playbook of actually go the step further in carpet bomb, but they did reach in and get all the contact information. And so they were checking, they would grab your address book and check everybody on there. And I remember when I onboarded on the WhatsApp years ago, it checks and then they surfaced for you like, oh, hey, I think it even shows you your whole address book. And then like checks like people that are on WhatsApp who are in your address book. Yeah. Exactly. So anyway, Alex is like, oh, yeah, I was working on another project and I found this awesome dude in it back in Russia on, who's a really great iOS dev. I loved reading that in the recent. I know. So great. This guy named Igor, Salo Menikov. I think I'm pronouncing that right. And so he sounds like cool. He contracts up Igor. They code up an app, this, you know, away message app and they're getting ready to ship it. And he sounds like, oh man, it turned out, you know, in the app store, they're like, this new app store that Apple has, I guess the app store must have shipped at this point in time because we're now in. Yeah. If I remember right, I think that they announced the SDK at WDC, which would have been you and then shipped it probably four months later, three months later. So it would have been out for a few months, but they wouldn't have had push yet because that came in iOS. I don't know. Push is coming in a sec. So no push, no push messages, no push notifications that apps, third party apps can provide. So Yann is ready to Yann and Igor ready to ship the app. And he's looking through the app store and he's like, oh, we need to incorporate this as a company because there are all these developers and remember back if you remember back in, well, you would then you would have done. You needed a dump number, you needed a dump number, but also if you didn't, you could ship it as an individual, but then your name is listed as the developer and then people start contacting you. Oh, yeah. Oh, yeah, you had to like fact stuff to Apple like this is this is the why I incorporated my first business is because this was a requirement of the app store. Otherwise, your name was on it. Totally. So get this you will bet you will totally appreciate this. So this is on Yann's birthday in 2009, February 24th. He he's like shoot, we got to incorporate this. He drives up to San Francisco. He talked to like an accountant friend of his was like, how do I like incorporate a company in the counts like, oh, no, don't worry about it. Like I got the here's a template articles of incorporation in the state of California. There's like five articles there and he's like, just like, you know, do a control age, you know, find and replace and put, you know, what's happened instead of whatever I got here. Then you drive up to San Francisco, you go to the secretary of of state in San Francisco, you show him the articles, they stamp it, you pay a hundred bucks and you're done. So that's what Yann does. He drives up. He does that. He takes a photo of it and he sends it into Apple and boom, what's app ink is born. I love it. Not exactly, you know, usually, you know, typically you start now, start up, you know, all these ambitions, you're like, oh, yeah, I'm going to go talk to, you know, I'm going to go talk to Wilsonson, senior, you're going to go talk to, hey, I think the great law firms out there, you know, incorporate this. Did my first app LLC was legal zoom? Like, why not? What you even use legal zoom, Yann was just like, he literally scribbled some stuff on paper and did it by hand. So they get that done, they ship the app with these great expectations. Yann thinks it's going to be so awesome. And his own words direct quote, it fails horribly. And so what's the functionality at this point? It's just the statuses. Like you can just say, like, hey, in case you happen to open this app and check. And you're curious what I'm up to. This is my status. It's literally just a way messages, no notifications. If you happen to exactly like said, if you happen to open the app, you can see. And a way message just seemed like pretty useless unless someone's trying to message you. Right. Right. I mean, literally the name of it is like, I'm sending a message that I am away. So usage is horrible, but they pick up people registering and downloading the app. And this was this I thought was so fun reminded me of these days. They do a pretty interesting growth hack. So there were so few apps in the app store back then. And I remember this like I did this for years. I would check like every week. What are the new apps? What are the new apps? Apple had the what's new section. And Yann realizes he's like, you know what? I can get a lot of people just trying this out. If every week I change the name of the app slightly, Apple will put me in the what's new section week after week. I swear this is what he did. Crazy. And so as a result, he's getting all these users. They're like trying it once being like, this is stupid and stopping, but he does have a bunch of people like he's at least getting that feedback. He knows like he's been in the value of while and he's like, all right, got to keep like working on it, iterating on the product, tries adding a bunch of features. It doesn't really help. Well, one thing I forgot to mention from back in the Yahoo days, Brian and Yann bonded not just kind of over economic friends and their ethos, but they also both are incredibly passionate about ultimate frisbee and they would play ultimate frisbee together. And so they go to a game together one day when when Yann's working on this and he's talking with Brian afterwards and he's like, you know, this is not working. I should probably just give up and go back to looking for a job, go back to, you know, Facebook or find some other start up. And Brian is like, no, you got to keep going. Like literally the quote is he says you'd be an idiot to quit now. Give it a few more months, keep working on it. And Brian's not actually involved with the company. Not at all. He's just a friend at this point in time. And Brian was working on his own startup at this point in time. I actually couldn't find out what that was, but whatever it was, he eventually made the right decision to stop that. And this was, I mean, it's so, you know, we haven't used the history turns on a knife point phrase in a while here on. Maybe since Blockbuster. Yeah, maybe since Blockbuster. But like, Yon was ready to quit. And if Brian hadn't told him to keep going, he wouldn't have kept going long enough through WWDC 2009 in the summer when Apple introduced his push notifications for third party apps. Boy is timing everything. Oh, man. Is it ever the funny thing is you would think and in hindsight now this is like so obvious. It's like, oh, now, you know, I can send, I don't have to rely on users randomly deciding to open up my app and see what's going on. I can now send them notifications and prompt them to do this and like messaging, duh. Why don't we just build all of aim instead of a one's to messenger and an I.C.Q instead of just away messages. Funnily enough, at first, Yon is like, all this is great. Now I will update what's up so that every time you change your status, it'll just broadcast the away message out to everyone. You couldn't actually message. He was only broadcasting away messages. And we should we should take a moment here like I was fortunate to like be living through this era and be very, very, very obsessed with the iPhone as I was like starting to create apps. So you might be wondering like, why didn't aim come to the iPhone? Well, they were like aim was early early partner for Apple. Yeah, they had an app on the app store very early. I want to say iOS 3 like this early, the other app that came out really early that was originally, I came up with as a flash website or an HTML5 website, like a really early one, but it was called Mibo. And it was a cross service messaging client where you could have aim and I.C.Q and it sort of like subscribed to all those different APIs. And it was also on the desktop, right? Originally. It was desktop, but they they right exactly. But then they they were one of the early companies to have an app. And I should go watch all dub dub videos, but I do think they were at one of these. I think aim was like demoed on stage as this is a really good way to use notifications to send messages to people. If you're out there wondering like, why didn't those companies just do it? They did. They brought the functionality. They sort of ported from desktop. So it was sort of it had potentially too many features. It was it was not sort of necessarily a native feeling experience, but it also didn't have the sort of genius thing that that Yon had with the network being based on phone numbers. Yeah, nobody else had that. That was a major major key to what's apps success and ability to to outstrip all of the you know, new entrants and aim and Mibo and all all these legacy guys transitioning. The other important thing to know about remember about what was going on at this time was there was, you can say BBM. No, go for it. Well, BBM, Blackberry Messenger, there also was a playbook of how to execute messaging on mobile that had been around for several years and that was Blackberry Messenger. And these are the days people used to talk about Blackberry being crackberries and you know, there really were two core use cases of Blackberry and I think people forget this. One was corporate email and that's what now when people think of and remember rim and Blackberries, they think of that. But actually know a lot of consumers were using Blackberries and the killer app was Blackberry Messenger and it was a fully featured mobile messenger just like way ahead of its time, but it was limited to the Blackberry network. Yeah, and the way people talk about BBM then is very similar to the way that people in a very up-and-y way talk about iMessage today and the way that people refer to O Blue Bubbles versus Green Bubbles. I remember my friends who had Blackberries then and of course I did and I was rocking my candy bar or I think I had a flip phone at that point. But I remember one of my friends in college being like, oh yeah, no, I don't really, I don't like texting. I don't text people. But if they have Blackberry, I'll definitely be BBM. I really like, that's nice. And of course, there's slightly different feature set. You can see when things are red or not red, but like it was the sort of like cool network to be on. It was the blue bubble. Yeah. So, Yon Smart and Ryan Smart and you know, Brian's kind of advising him at this point and their friend Alex is helping them and they realize pretty quickly and remember also they had this user base because they kept doing these growth hacks of changing the name and getting new people coming in every week. They had this user base and the users were like, guys, I really just want a message. Like these away messages are nice, but can I, can you please like to implement messaging? Yeah. And they found that people were actually using the away messages coupled with the push notification that had just come out to sort of use it as a messenger anyway. So they would like frequently update their status and their friends would update their status back. Like they were sort of hacking it to make it a messaging app. And it's going out to everybody in their network. It was like, it was like, what's happened Twitter combined? Yeah, I was going to say it's kind of like early Twitter. Yeah. Anyway, so they figured this out. Like, okay, great. We're going to build messaging into this. They do. They launch it in like late August, early September of 2009 and it immediately takes off. Again, one because it's, they really do a good job with the execution. It's super simple. The UI is very straightforward. But again, this address book innovation, the contacts and not having to go through user names and finding your friends and all that and everybody just being on there is major. And because again, they had had all those users that had used previous versions of the app. They had, you know, suddenly about a quarter of a million users. And so that's enough network density that people can start getting real value out of the app. And it just starts growing like gangbusters. So at this point, Jan goes to see Brian again and says like, hey, this is really working. Like, what do you think about coming and joining me full time and like doing this for real? And like, let's raise some money and make this happen. Brian says, yeah, I'm in. This is now for real. I'm going to do this. And he says, I'm going to invest some of my own money from my Yahoo savings. Then let's go round up a bunch of our former friends at Yahoo and put an angel financing together. So they put together $250,000 all from former friends and coworkers. Brian joins the company officially. He gets, it's been reported roughly about a 20% stake in the company. Jan owns the rest of the company and then I don't know what the valuation was on the seed ground. So the angel investors for their 250K obviously get a stake. And it kind of goes gangbusters from there. Jan, he says much later in a talk. He's very direct as you would imagine given his e-created upbringing. He says, he's alright. He's like, look, we were lucky. We stumbled into something that people found really meaningful. And what it was, messaging is the killer app for mobile. Like period, full stop. And it's true. It's come to bear in every country on every platform. Yeah, there's so many things that you can do on your phone and Matt Culler, Benchmark famously talks about the smartphone is the remote control for your life. And it's right you can order a car to compete you up and do all these things. But if you think about everybody listening to this, you personally and certainly an aggregate, the population, you spend by far the majority of your time, forget Instagram, forget Uber, forget all of that, messaging with your friends. That's the real primary killer app for mobile phones. Do you consider Twitter to be messaging? That's a good question. No, I think it's different. I think it's social media. Maybe social media is near or equal importance. But if you think about what's, definitely that's the truth for me. I'm curious if it is for you. Like what is the most important thing? Like I could live without Twitter on my phone, but I could not live without I message. My most used app by almost a factor of two is Twitter on my phone by the amount of time spent over the past week. Interesting. And then mail coming in at number two. And messages is down probably at like number four. I do probably the most important communication in messages, but I'm in and out of it. I mean, it doesn't have to be the dominant thing taking up the screen most of your time to be the most important thing on your phone. That's your end probably Brian and Jan would totally agree with that. It's not about time spent. It's not about it. The most important conversations you're having in a, you know, in a messaging relationship. Once they figure this out, you know, Jan then also talks about like before, you know, and sort of the what that one point out version when it was just about statuses and the way messages, it was just like Ben, you talk about all the time about the definition of product market fit. It was like you're pushing a boulder up a hill. You know, everything is hard. Like getting users to use it is hard, getting engagement. Nobody wants to invest. Nobody wants to work for you. This is before product market fit, before product market fit. And then all of a sudden they have instant product market fit with messaging and everything changes. People are adopting like crazy, all of their old Yahoo friends want to come work for them. Investors start beating down their doors and literally looking for them in unmarked locations and attempting to network their way to the founders. Totally, and we'll get into how that comes together next in just a sec. But before they do take money, they do another really smart thing again for them at the time. And I think this might have actually been Brian that kind of came up with this and this and advocated for doing it. So they were free. It was a free app in the app store. But again, remember think back to 2009, they're paid and free. You could do both in the app store and it hadn't yet shaken out that like free was the way to go. There were a lot of risks. Yeah, and there were certainly no in-app purchases or subscriptions like you could you could pay an amount of money to download an app or it could be free. Yep. And so Brian suggests, well what if we charge 99 cents for the app in the app store? That would do two things. One, it would dial down growth a little bit, which on the one hand is bad. But on the other hand, our servers are melting down and we got to like pay for server costs and remember they don't run on AWS because they're using Erlang and I think they ran on free BSD. It's also 2010. I don't know what services are available. S3 and maybe EC2 but like AWS is not huge yet. And certainly not anyway. Like cloud at all. Yeah, dynamically scaling apps are not, or dynamically scaling back ends are not a thing yet. And remember reliability for a messaging service and preserving chat history is like the number one thing. So you don't want your service going down. So he's like, okay, this might solve our rate scaling problem or give us some breathing room. And then two, give us a business model and we can kind of control our own destiny. I thought that was the craziest thing when I read it that like that I always knew it was a dollar and I knew like, okay, because that's like they think of this as like it's not that expensive to run the service. The most expensive thing is like sending the SMS verification every once in a while when a new person joins the service and we need to verify their phone number. So like, that actually ends up being quite expensive to do that. Totally. But they're not these, these guys aren't in value capture mode. They're just trying to figure out a sustainable way to sort of like keep the lights on. So it's this dollar year thing. It blew my mind when I realized that they were toggling the dollar on and off when they wanted to throttle growth. So that their back end could catch up. And it's like that is some unbelievable product market fit right there. I know. I know. Unbelievable. Well, and so the other thing though, yeah, they can charge $0.99 for the app because the value prop to consumers is unlike aim and I see Q that are desktop mobile messaging is truly an SMS replacement and SMS is super expensive. Even in the US, like you were paying, I remember this being the stupidest thing because you would pay for like, I think I'd have to pay an extra $10 a month to get unlimited SMS. Like there was some era in like 07 to 2010 where you would pay by SMS and that was a dominant feature of phone plans. And I think that's how it mostly was internationally. But at least by like 2010, 18 and 10 others had adopted this unlimited texting for a $10 add on, which can I like, like, $120 a year for texting. It's ridiculous. It's like, yeah, to go in a little bit of a technical aside here. The SMS protocol is limited to 160 characters, which is obviously a super small size of data that's transmitted back and forth because with early cell phones, the way that the cell towers would know that your phone was still on their network was every second or two. They would just go ping all the phones and there was an extra basically enough room for an extra 160 characters in that heartbeat that it was communicating back and forth with every phone anyway. And so it literally had no additional cost of goods sold to carriers to do this because it was just sending and receiving these extra pieces of information when it would have been pinging those phones anyway. And so it's kind of a genius business model move on the carrier part. But I'm aware when I learned that as a consumer being so pissed. Like, one of these were the days, you know, all those new stories of like, you know, middle age dad in, you know, name your suburban, you know, town, outraged to get $100,000 bill from carrier because teenage daughter is sending 60,000 text messages, you know, at a month. And so that was all in the US. But then as you said, in many countries around the world, especially in Europe, but lots of countries around the world, it was still, it was either a meter per message feed consumers were paying. But then think about like a continent like Europe where there are lots of countries altogether that are like states in America, you know, people are texting and have friends like 20 miles away that are in a different country. You're paying a tariff to go outside of your country. It's costing you like $5 a text message to text your friends. So here's what's about there. And they're like, even for 99 cents for the app, right? That's an amazing value proposition. So this magical arbitrage opportunity where they could say we could basically provide the same service if not better. Is no limit on characters. Right. All the way the business models are set up is for this Gorge consumers on SMS. And this new thing came out the data layer, you know, the data network, which I don't, so 3G was new as edge and 3G, but it had just rolled out. And suddenly you could basically spoof the functionality of SMS just over the data layer. These moments like don't happen that often in the world at the scale that they happen here, where you can, you get like a six month window as a startup to be like, oh my God, the business model of the time is so misaligned with the technology that's available. We'll get to playbook later, of course. And I think this is a huge one of like, there are these moments that happen with every, you know, paradigm shift in technology where, you know, we've talked about it with the internet before. We've talked about it with a little bit with mobile where it's like, oh man, this is the window. It's very open for short period of time. But like if you can get through, you can realize billions of dollars in value. They do this. They ship, I believe really fast. I think at like the end of 2009, they ship the ability to add multimedia to what's that message is. So photos, videos. I think, yeah, I think video came later, but definitely photos. Definitely photos. And so then and girls just goes through the roof. Now the VCs start banging literally hanging, literally pounding, uh, Jan and Brian. And it's so funny. The, so now we're in 2010 towards the end of 2010. Um, I didn't realize this in doing research. I guess one venture capitalist, Jan doesn't say whom, um, what firm literally gives them a blank term sheet, like a term sheet with like the amount to be raised and the valuation blank and they say fill in the numbers. And, um, you know, this is so funny, I mean, thinking back on this time, you know, this is when I started in venture series A's were happening at this time. I was doing them of like series A's were like $3 million at like a $8 million post money valuation. And so for a venture firm to just literally give a blank term sheet, this is right after the financial crisis is in sanity. Um, which of course they're, they're non binding. So like, you know, right. Of course, but actually interestingly though, and this is, you know, a good lesson as a bunch of capitalist, that tactic backfires. And Jan says, you know, Brian and I talked about it. And we were like, you know, if these guys are that callous with other people's money, uh, do we really want to like, uh, those the partners that we want, you know, to be our, you know, board members and, and advisors and our financial partner. And so they ultimately end up going with Sequoia, uh, Sequoia capital and Jim gets, uh, there. And Jan talks about why also the great quote from Jim as he's talking about this. He says, um, he and Sequoia had looked at, you know, they famously do this. They look at every company in an emerging space. They think that they're, they've a thesis on a spade. They go meet with everybody. And he said, you know, we met with these as pinger, tango, beluga, you know, kick was getting started at this time. All the other messengers, everybody was trying to get this. The way it got acquired by Facebook and Facebook was messenger indeed. It did. And he's like, but it was clear that what's Apple is the leader. And he says, you know, what he finally got to talk to you, and Brian, uh, he said, this is the only time this has ever happened. And he's, he's ever seen this in his mentor career. They were already paying corporate income taxes. Like, they were profitable. So it's like, here's clearly this is the product leader in the space. And oh my god, these guys are printing cash. Like, I've never seen this. So he convinces them to, they ultimately raise $8 million that's a coil leads. I think it was hard to find them, right? Cause they didn't put a sign outside their office. They weren't answering emails. They weren't answering phone calls. So I think Jim, like, finds their address and drives there. And he's, he's the one you're referring to that's like banging on the door, saying, like, I really, really would like to talk to you. Yeah. And he talks about that he, um, Yann and Brian used to like to work out of the Red Rock Cafe in downtown mountain view, which I've been to many times famous spot in Silicon Valley lore. Jim eventually gets, you know, sits down with them and meets them at Red Rock and just starts like answering all of their questions and, you know, uh, pitching them on wide and just worked together. So they do an $8 million around at a slightly lower than an $80 million post money evaluation. I believe Sequoia got somewhere between 10 to 15% of the company for this investment. Again, crazy for this moment in time. Yann talks about why they picked Sequoia and Jim and he says, you know, there are three reasons. One, all of Sequoia's past successes that we talked about in Sequoia Part One, including Yahoo. And the brand associated with that two kind of personal chemistry with with Jim. And then three, this is really important and is going to come back here in a second as we get into Facebook. And he said it was really important that they didn't metal. He's like, the business was working. We were printing cash. We were the clear market leader. We were growing super fast all around the world. And he said, Jim, it's quite, they said to me, like, look, we, you know, you don't want us. Like, we're not going to mess with you. You know, things are working here. Like, if they're not working, we can talk about it. But like, we will help you and do whatever you need. But like, you guys are doing a great job. And I think that's just like so, so powerful in terms of what that sets up for a relationship between a founder and a venture capitalist. But also, like, clearly, that was so important to Yann and Brian all throughout everything and foreshadows what's about to come with Facebook here. Yeah. And when others do start to exert control. So this happens. And then they're off to the races by October 2011. It was early 2011 when they were on finally closes. By October 2011, WhatsApp is processing over 1 billion messages per day. By the next year, August, August 2012, they grow to 10 billion messages per day. It's exponential growth right there, 1 to 10 billion in one year. A few months later, by February 2013, WhatsApp has about 200 million active users around the world. And at this point, Sequoia in secret, at this point, time, invests another $50 million in the company at a $1.5 billion valuation for a company that, you know, they're making their $1, you know, your fee that they're only charging in some countries. In the US, it's in the UK, I believe it's in some other European countries. But nowhere else around the world are they actually charging for the app. But clearly, the strategic value of this is just so high that the growth is incredible. Yeah. It's not like on any multiple of net income, you're going to any reasonable multiple, you're going to get to 1.5 billion dollars. One of the fascinating things here is, you know, Sequoia, there's no one that invests between. So the last time Sequoia invested, it was $70, $80 million. They come in two years later with a term sheet for a company that they're already basically the only investor in or the only institutional. They mark up their own deal and they're not shy about market it up and saying, hey, like, we think this thing's worth $200 million now. They say, nope, it's worth a billion and a half. And like, of course, the growth of the company and there's lots of good reasons why you could justify that. The outcome certainly justifies that, but it takes, you know, a firm like Sequoia and a partner like Jim, I think, to be able to make that call, yeah. Let's bring in another thread of the story. There was probably one specific thing that was giving Sequoia and Jim a lot of confidence here. And that was before, almost a year before that round took place in the spring of 2012, Yon gets an email with the subject line, get together question mark. And that email is sent from Mark Zuckerberg. That's interesting to start with. I believe as the story goes, Yon kind of tries to step on him. He's not really interested in, meaning with Mark and famously, they like totally resisted talking to the press. They didn't have a sign on the building. They weren't doing any of the Silicon Valley hype game. It really just wanted to focus on the product and growth. And most of the usage is international. People in the US use WhatsApp, but by far, it's much more dominant in other countries around the world. And so Yon is trying to give Mark the stiff arm. And Mark just keeps coming at him. And so at one point, Yon forwards the email to Ian to Brian and to Jim Getz and says, persistent as the story goes. So they decide to take the meeting. There's one other fun thing to note here before we move on from the 50 million that's a coin vested. Yon and Brian tell Jim, by the way, we don't need your money because we never spent any of the original 8 million. And after the deal closed, they actually sent, I think, a screenshot or a photograph or something of the bank account before the financing that says like, you know, 8.125 million or something like that to prove it to him that yes, we grew to 50 employees and we scaled and we didn't need to spend any of your money in the first place. I think it was actually, it was over 8.25 million because it was over the total amount of capital they'd raised altogether, including the 250 seed round. But again, before the 50 million dollar round, Yon and Zuckerberg and Zuckerberg do end up getting lunch together. Nothing kind of happens when Zucker makes it clear. He's really, really interested in what WhatsApp is doing and there might be really interesting things that these two companies could do together. Of course, Facebook had just come public and had a liquid public currency and I'm sure all of these things were in place. Stock may have been in quite the dip, but still. And that's probably actually why nothing happened at that point in time was the stock was in the dumps. But then as we've chronicled it, then they bought Instagram and everything turned around and the stock went way, way higher over the next year. Also over the next year, WhatsApp grows to over 300 and then over 400 million users. And so now we get to early 2014. They've done this coil deal, the second coil deal. And this is really interesting. There's only been very little reporting on this. So we have only a few tidbits to go on, but apparently 10 cents, which at this point as we've chronicled developed a WeChat and once WeChat and QQ before that, and they're the largest social and messaging app in China. Apparently 10 cents was ready to do a deal to buy WhatsApp for in the single digit billions, high single digit billions. And the deal was pretty far along. And Ponimah, the CEO, was scheduled to come over to California to finalize the deal with Yan and Brian and Jim, but he had to have back surgery and had to delay the trip. And we're now in late January, early February 2014. During this period of time, I'm sure WhatsApp, and Yan and Brian and Jim engineered all this, they kind of let it be known to two parties that things might be going on. One courses, Mark and Facebook. The other is Google. They had gotten to know Sundar, who at that point in time was running Android, remember, at Google. And they kind of let it be known to Sundar that something might be going on. Sundar gets them a meeting scheduled with Larry Page for Tuesday, February 11, 2014. Somehow Facebook and Zach find out that this meeting is scheduled. And he gets Yan over to his house the Monday night before February 10th. In that meeting, he says, no, we're serious about an acquisition. I know all your beliefs about advertising and your product beliefs of WhatsApp and how committed you are to privacy and being independent. And so here's the deal. We want to acquire you. It'll be a big number. WhatsApp is going to remain independent. Now remember, Facebook can credibly say this as we've talked about on the show. They are the poster child for making these leave them alone acquisitions, Instagram being number one here. And it's going to be mostly stuff. It's been a bit of a two years since Instagram. So there was like two years since Instagram. That's point. And it really gone well. And he said, I really want this to be a partnership. So much so. Most of the, we'll do most of the deal in stock. And you're going to become a very large shareholder in Facebook, Yan, you personally. And we will make you a board member of Facebook, which is I think one of six or seven at the time. And nobody else, the only Facebook employee board members are Mark and Cheryl. And everyone else is a outside board member. So this is pretty big. He really, it's unclear if Facebook knew about Tencent, but they knew about Google and they really did not want Google to acquire WhatsApp. And Yan says, OK, interesting. Thank you very much. The next day, he and Brian go down to Google. They meet with Larry Page. They talk for an hour, have a nice conversation. unclear. And where's Google in their messaging world right now? Because Google's launched some new form of messenger. I think it's like an annual tradition for them to launch a new messaging product. And so I think at this point, like G chat, I don't think was totally dead. Hangouts, they were trying to double down on it. It was before Duo and some of these new, fangled ones. But like, you got to remember back at this time, people really felt that, or at least the tech press was obsessed with writing about the mobile messaging wars. And there are these deep dives on WeChat and China and WhatsApp's crazy growth. And Facebook had acquired Blue Guy, I think, and launched messenger at this point. And it was, you know, who will win this new, is this the new app store? You know, is messaging sort of the new app? Like now we don't think of Google really as a messaging company, even though obviously tons and tons of messages are exchanged on Android all the time. They were very much still in this race for what everyone thought was going to be the next user interface paradigm. Yeah, yeah. And bailing at it. Like I said, annual tradition, they launched a new one. In the meantime, Jan and Jim and Brian, they're trying to figure out, well, what's our number? What's this? And Twitter had gone public recently. And Twitter had a $30 billion market cap and had fewer maus than WhatsApp. And of course, Twitter had a very robust advertising business model at this point. And WhatsApp had very little business model. But they kind of look at each other and they're like, well, Twitter is worth $30 billion. We're bigger than they are. We got to be worth at least $20 billion. And so they put this out to get all the parties and Zuck Bites. And so the next day, Jan and Zuck get back to you. He's like, I just dropped a billion on Instagram. So what's 20 of that? What's 20 of that? And the week goes on. And then by the end of the week, Friday, February 14th, Valentine's Day, that evening, Jan goes back on Valentine's. Also Jenny's birthday, by the way. I'm going to eat wonderful wife, Jenny's birthday. Dude, you are ruining her two factor off security answers here. And Jan's as host like totally. Yeah, everybody's birthday. We were just all about birthdays here on Quired. So Valentine's Day, Jan, Mark and Jan have a romantic dinner at Zuck's house. I believe it was during that dinner that they hammer out the details and Zuck puts 19 billion on the table. And I don't know if he literally put 19 billion on the table, but I think it was 16 billion. And then the next day, they negotiated up till 19.4 or something. There was something where there was an initial offer and then. And then they raised it. You know what I mean? It was 16 billion dollar acquisition plus $3 billion in stock awards and retention grants for Jan and Brian. So that might have been what brought it up. They agree. They shake hands, they hug supposedly, Zuck says that this was F bomb exciting and takes out a bottle of Johnny Walker blue, which he knew. Jan loved. They have a shot and then they handed off to the lawyers. And so over the weekend, remember, this is a Friday. Now mobile world Congress is coming up the next week. They want to announce this and get it done before mobile world Congress. They handed off to the lawyers and over the weekend, the lawyers put everything together. Now it's super important. Zuck just wants this done. It's super important to Jan and Brian that like they don't want advertising on WhatsApp, Facebook's advertising company. And so they get their lawyers to put a clause in the documents that says if Facebook ever implements advertising on WhatsApp, that the two of them, and this is where this, the $3 billion in retention and stock grants for them become super important that they would get full acceleration of any investing on that stock and that they could walk away with all the money, which may have kept Facebook from putting that on the roadmap until. Exactly. Exactly. And so I don't know if this was something that because the deal came together so quickly, Facebook didn't think hard enough about this or they agreed to it and thought, you know, whatever, we'll just do it anyway. This is in the final documents. Wall Street Journal did a big, the willing to in our sources did a big article about this that it actually made it into the final docs. And so it was part of the deal. The next week they announced the deal, $19 billion total consideration by the time the deal actually closed, Facebook's stock had run up and it was $22 billion in total value. $22. You know what's another $3 billion between friends at Mobile World Congress. Mark Zuckerberg gives a keynote speech. He talks all about the acquisition. He says that it's, you know, what's up going to be independent? It's not going to be advertising. It's really the vision is related to It's that they're building like this suite of utility services for the internet, particularly in developing areas outside the US where their monetization currently isn't working at all. It's all going to be great. And for a while things are great. No pressure to monetize. And before we move on, we should talk a little bit about the way the financial terms of the deal broke down. So sure it's this $16 gone $19 gone $22 billion all in package. Four and a half billion of that is in cash. Close to 14 billion of that is stock, Facebook stock consideration for WhatsApp. So that goes to all shareholders including their existing investors. You got to remember the share price point. It's a coin. I held that stock. Exactly. I mean, there were $77 billion already. Oh man. $77 a share. There'd be an additional 25 billion for the combined total of those shares would be up another 25 billion. You then go and look at the shares that were the RSU's given to the founders when they came over to Facebook. That would be an additional $7 billion today if they had held onto that stock. I don't think they did for philosophical reasons when we're going to get into that. Get to came out of your Facebook. But like, oh my gosh, what Facebook was giving up here and we'll talk about this in the grading. I don't think you should think about is the cash value. I think you should think about as the percentage of their equity value, which is about 10%. There are 200 something billion market cap company at this point. They basically sold 10% of the company in order to go and get this asset. For reference, we'll talk about this in analysis later, but Facebook is a $630 billion market cap company today. Pretty wild. Totally wild. Well, we'll bring things on home here on the history in fact, a couple of things that will go through quickly. At first things do go great. There's no pressure to monetize growth massively accelerates. They were 400-ish million in use at the time of the acquisition by August of that year in 2014. They hit 600. Also that fall in 2014. Importantly, they implement full end and encryption and privacy within WhatsApp. January 2015, 700 million, it may you, April 800 million, it may you, and then by the end of the year, they're at a billion users. Which then importantly makes them, in 2015, the most popular messaging application in the world surpassed. A higher world. Yep, surpassing reach app. Which is still something I think is so underappreciated today. WhatsApp is the largest messaging application in the world. Today they have 1.5 billion monthly active users. Yep, we talk a lot in this show about it's hard to grasp the scope of China scale. We chat, as I think the end of last year, had 1.1 billion users and it's kind of the operating system for how people do things on their phones of all types, including messaging in China. It's 40% bigger than that. Yeah. Now a very different business says we'll get into. But some cracks start to form. Remember, if Facebook had agreed to this no advertising thing and all this messaging, behind the scenes though, Facebook is of course like, yeah, we're an advertising company. That's why we're a, that's our business model. That's what works on the internet and that's why we're a huge, you know, at this point, hundreds of billions going to $630 billion market cap company. And yeah, WhatsApp like you should be part of that. Yannem Bryan fight it apparently. It gets really heated internally. Apparently, Charles Sandberg keeps saying that I mean it worked for Instagram. And they keep rejecting any participation in the ad ecosystem within Facebook. And importantly, that means two things. Not just showing ads on WhatsApp. That's actually at first the less controversial thing. It's about more than a consumer data, right? Sharing user data from WhatsApp users with Facebook and then Facebook has a highly sophisticated ad targeting system across all their properties, you know, core Facebook, Instagram, which is Instagram is on their hyper growth trajectory at this point. Yeah, messenger, everything else. They want to use all the data from Facebook to, from WhatsApp to help with targeting within those other products. And Yannem Bryan and Lig and FW. So things start to get really heated. And of course, remember, they instead that at the time of announcement, even in a blog post, by WhatsApp, that they would never do this. And Facebook to show they're really serious here. In January 2016, they say, oh, also, yeah, that revenue model that was so benevolent and scaling so nicely of $1 a year, yeah, it's gone. We're just making it free now. Yep. In May of 2017, the European Commission finds Facebook over a hundred million euros for misleading it during the antitrust process during the buyout of WhatsApp and saying that it falsely claimed that they weren't going to use data from WhatsApp to improve advertising and that they are. So that was to which Facebook responds something like, oh, whoops, we didn't mean to. That was a click. Yeah, they say it was not intentional. It was an oversight. Another interesting thing to know right around the same time, status goes from being an away message like feature to looking exactly like stories that is just, you know, being rolled out in Facebook and Instagram and messenger, which is a product that happens to lend itself very well to advertising. You can see where the setup is going here. So in September 2017, Brian is like, I've had enough. I haven't hit my earn out yet, but I'm leaving. He walks out. I'm so fed up that I'm leaving billions of dollars on the table. He leaves $850 million on the table, but he tries not to. He tries to invoke, and again, W's, W's Journal did a big investigative reporting on this. He tries to invoke the clause and he says, you guys are implementing advertising. It seems pretty clear I haven't hit my, you know, earn out yet, but I'm going to get acceleration here. And Facebook fights it. And they're prepared to go to the man. And finally, Brian says, look, you know, I don't need this in my life. I'm already a billionaire and he walks and leaves $850 million on the table. He immediately donate to $50 million to an organization called Signal that is essentially making an open source and to end encrypted WhatsApp competitor. He becomes the executive chairman there, sets it up as a nonprofit. It says, you know, they're funded in perpetuity and like everybody should stop using Facebook own products. Which I totally did not realize. Like, I've obviously I know about Signal, like tons and tons of journalists use it. People that it's sort of the one of the most widely accepted sort of private, secure messaging platforms on mobile. I had no freaking idea it was the co-founder of WhatsApp that sort of in his disillusioned post-facebook state. But yeah, exactly. He gives, it was not started by him, but then he gives, he turns it into a foundation, gives them 50 million and then becomes executive chairman. Then in March 2018, the Cambridge Analytica scandal hits. And Brian, he remember he left in September 2017, he sends out a tweet that reads on March 2018, it is time period, hashtag delete Facebook. And then all the, all the crap hits the fan, supposedly Cheryl calls Jan who's still, you know, at WhatsApp and Facebook at this time. It's like, what the WTF? You know, of course. Hey, do you know this guy? Can you talk to him? Yeah, but he doesn't retract it. And in fact, Brian goes and does a big interview with Forbes. He says, quote, at the end of the day, I sold my company. I sold my usage privacy to a larger benefit. I made a choice and a compromise and I live with that every day. On my yacht. Yeah, on my yacht. Yes, of course. Brian really seems like, but fine and Rian seemed like real old people. But yeah, I mean, that's where it goes. And so then April, the next month, Jan announces on Facebook that he is also going to leave WhatsApp and Facebook. He leaves about 400 million on the table. And at the point where he leaves there, that's like, that's like right when they hit 1.5 billion monthly. And so like now they're just kicking the pants off of any other mobile messaging happened. And it's funny, you know, in his post, when I saw this at the time, and I remember this, I thought, oh man, Jan is just trolling Facebook because his post reads that he's going to quote, take some time off to do things I enjoy outside of technology, such as collecting rare, air cooled porches, working on my cards and playing Ultimate Frisbee. And I didn't know all that I'd know about Jan now at the time. And I was just like, oh my god, this is such a troll. You know, I mean, on the one hand, good for him, we're doing this. But like the funny thing is though, I now feel like I'm so in Jan's head, I think he was totally serious. He actually is a nut. Like there's a, I listened to a great podcast about like collecting rare porches. Like he's so into it. Like I think he was being dead serious. That's crazy that he decided to get specific and say rare, air cooled porches in the press quote. I'm willing to this in the show notes, but that is exactly like he doesn't like turbo charge porches. He likes naturally aspirated. He thinks it's the best. So like I had no idea until I found this podcast. There is a whole niche community of Porsche 911 enthusiasts that have like religious wars about, you know, naturally aspirated versus turbocharged engines. It's amazing. You can have a religious war about anything, my friend. About anything. I think the moral of the story is podcasts are the next platform for the internet. So he's gone. And that kind of gets us to today. I mean, a couple of things will cover, but WhatsApp continues to grow hugely. Yeah, they did, they did one other thing that's worth calling out during this time period in the last few years. And that's they launch WhatsApp business, which is a second WhatsApp app that I installed on my phone that basically works a lot like WhatsApp. But if you're a business and you're communicating with your customers through WhatsApp, this is a sort of optimized for business way to do it, which, for shadows, some of the stuff that they potentially plan on doing with the app. But, you know, I open this show by saying like they haven't done much, I mean, they really haven't. Like they've scaled it. They've simplified the UI a little bit and they launched WhatsApp business. So there are four quick things that have happened. One is trying to launch WhatsApp business, which hasn't really, has been kind of a failure to launch. And two, they tried to get into mobile payments in India. It's in beta, but it's been in kind of perpetual beta has also been so. It's been in freaking 2018. Yeah, kind of early 2018. There's also regulatory issues. There's something like they built a data center to support like 500 million people using it concurrently, but it got tied up in, you know, some, a little regulatory thing. And on earnings calls recently, they've said it's ready to launch. So like maybe we'll see it this year. We'll see maybe, but and this is one of the reasons we've waited so long to do this episode is, you know, the messaging out of Facebook has been for years like, wait, monetization for WhatsApp is coming. Well now it's been six years and like, you know, it's not here. I just want to touch on this, this peer-to-peer payments thing. Like if you run the playbook of everybody in India right now or tons of people are using WhatsApp to message, we just make it easy for them to send money back and forth. And suddenly it's like Venmo or SquareCache then and that doesn't have a business model. I should note. So they're going from something without a business model to something without a business model. And we heard this, you know, directly from Andrew Cortino when he joined us for the Venmo episode, like peer-to-peer payments, there's no consumer acceptable way to take a big on a peer-to-peer payment. But there is all about the merchant payments. From merchant payments. Yeah, exactly. So, you know, peer-to-peer payments can be a way to bootstrap into merchant payments. Right. There's one more leap that they need to then take, which is, hey, all the consumers are exchanging money, let them pay at your store with this thing. But like, we're still two leaps away from that. Yeah. Okay. So the next two things, that sort of are the most natural, you know, one is, okay, fine. The founders are now gone. This clause doesn't apply anymore. You'd think that they would just implement advertising, at least in status, which is the stories, you know, Snapchat competitor that they baked into WhatsApp. So they announced Facebook announced last year in the 2019 that they were going to do that. So, there are some types of what advertising and stories on WhatsApp would look like. And stories on WhatsApp are pretty popular. Like, a lot of people around the world use them. As a matter of fact, on the Q2 earnings call this year, there's a quote from Facebook saying WhatsApp status is already the most popular, ephemeral stories product in the world, which is an hell of a statement. Yeah, totally. It seems obvious, right? Well, they just announced last week that they're not going to do that. That they're pulling any, all advertising from stories on WhatsApp. So back to no advertising on WhatsApp. And then this is where things really jump the shark. The final thing that has happened in the post founder exiting world is Libra and Calibra within Facebook, which of course, the Facebook's cryptocurrency efforts that were supposed to be, you know, that thesis was, well, WhatsApp would make a lot of sense as a remittances platform for people use it to communicate with trusted interpersonal relationships between countries. Shouldn't it also be, you know, a really great platform for remittances and people have always said, cryptocurrencies are great for remittances. You can avoid all these tariffs. That makes sense. But like, we all know, Libra's a master right now. I think they're being sued by the government. I don't know the latest state of it, but seems unlikely that that is going to be a viable business model anytime soon. Anytime soon is the right thing there. I think there's a variety of things that could still work out for WhatsApp. But the important takeaway listeners is we could not sit on our hands any longer before doing this episode and just keep hearing, wait and see from Facebook on earnings calls. It's not happening in the near future. There might be something interesting. It might be with paying businesses that might even be tools for businesses to promote. I don't know. I'm not being articulate here because I don't actually have a really great thesis around this. But the thing to take away here is it's not going to be very soon. Yeah. So I think this is the perfect transition to acquisition category. And this is the place to ask the question again, you asked at the top of the show, which is, okay, what is this? Like 22 billion for no revenue six years later, effectively no revenue. What's going on here? Yeah, David, before we categorize it, I have two things to say. One is a thank you that I want to issue as we get into the analysis here to friend of the show Turner Novak of Gelt VC for helping us tremendously in how to think through analyzing this one. Turner's a really smart person and all things sort of consumer social. And we spent some time trying to try to figure out how to slice this one up. The second thing that I want to say is I would love to quote for you how Facebook broke this down when they reported the acquisition to their investors, which I think is really illustrative of their thinking at the time. So they reported a $17 billion total sale based on the price that they knew at the time. Two billion was for the users that they acquired. Half a billion dollars for trade names. So what's app as a half billion dollar value brand out in the world? A third of a billion for technology, okay. And then 15.3 billion of goodwill. And I think that actually adds up to a little more than 17, but that's okay. So then they go on to articulate this is from the 2014 annual report that goodwill generated from the WhatsApp acquisition is primarily attributed to expected synergies from future growth, from potential monetization opportunities, from strategic advantages provided in the mobile ecosystem, and from expansion of our mobile messaging offerings, which to me says 15.3 billion of we have no idea. We just needed to own this thing. Now of course, this is accounting treatment and anybody who's worked in investment banking or certainly accounting knows goodwill is just where you stuff. It's a plug. But I think you're right. Like this is illustrative. I think they were thinking like, yeah, yeah, yeah, this is going to take a while and whatnot. But I think Facebook was fully expecting that this was going to be a cash flow monster, just like Instagram. Yeah. So listeners, if you're new to the show, the way that we categorize these acquisitions are people, technology, product, business line, asset, or other. And occasionally we categorize it as something that I'm going to elect to use today, which is a takeout, which is it is worth a lot of our money to stop this thing from existing as an independent entity or in the hands of someone else. And we are willing to pay handsomely in the form of goodwill to make that happen. Goodwill to make it happen. You could argue product. Yes, you could argue the asset of the users. Certainly wasn't the business line. Technology, Lord knows Facebook could build people. You know, there were 50 people that worked there at the time. Obviously some talented founders, lots of talented engineers. But my God, this thing was a takeout acquisition. Yeah. Well, I don't care who the people are. Nobody is worth 22 billion. So yeah, totally. I was takeout or I was thinking defensive. You know, both in the moment of like, oh my God, we can't like Google have this. And whether they knew about Tencent or not, you know, the other thing is we've talked about in previous episodes. Facebook was really trying to enter. Mark was really trying to come up with a plan to enter China at this point in time. And he really believed that China was going to be the next frontier for Facebook. Man, if Tencent were to acquire WhatsApp, then that would be terrible. No, of course, Tencent ends up acquiring musicly and building TikTok. So Facebook won the battle to lost the war here. But yeah, I think defensive and then fast forward to now. And yeah, things are pretty sad. The state of affairs is we just described. On the other hand, this gets into, if you're ready to move on to what would have happened otherwise, what if WhatsApp had, you know, certainly we just talked about what would have happened if Google or Tencent or somebody else had acquired them. But I think the bigger threat is what if WhatsApp had remained independent, would it in this world now where like everybody's so privacy motivated. Mark Zuckerberg has said once he decided not to enter China, that like his vision for Facebook is a privacy oriented world, right? Like, what if it's a bent Thompson phrase there that's a massive strategy credit? It's like, yeah, yeah, yeah, yeah, privacy is super important to us kind of, like the except when it comes to ad targeting. To be fair, they keep all the data to themselves. Like they buy virtue of owning the entire end and experience. They never, well, I mean, they don't exchange it with third party ad networks or other websites or that because you spend so much time with them, they own the data end to end. Yep, absolutely. But it would be interesting if there were a viable third standalone independent public company, which WhatsApp would certainly be at this point, you know, that were a different vision of what a social app looks like. Would they have figured out some of these business models that we talked about along the way? And independently, you know, what I don't know, I don't know, a lot of execution risk there. But certainly what we're threat. You nailed it. This is the real crux of grading. It's not so much about what is Facebook gaining by owning it. It's how much are they decreasing their risk of having no value in the future by this thing existing? Facebook's entire business is maintaining attention share. So long as you are spending your time and attention with Facebook, they're going to keep printing money at to the tune of 45% operating margin, 20 plus billion dollars of profit a year. It's a frickin cash machine. And so by looking out in the world and observing what's happening, they will have to squint to your point and execution risk, but there could be this thing that leverages all that connectivity that people have with each other and their exchanging messages, which isn't so different than sort of public posts and their exchanging statuses, which isn't so different than the way that we started with wall posts. It could evolve into a thing that steals attention share. And what would have happened otherwise when you think about this is they could have been independent and they could have sort of evolved into their own social network or to your point earlier, Google could have bought them and that would have been catastrophic because I think Google would have been sort of the only formidable ones as you mentioned who could have paid up, but then also who would have executed a sort of attention grabbing strategy there. And so to wrap this, I think my little rant here, what would have happened? A billion people could have shifted attention from Facebook to WhatsApp, but I'm going to hold off right now on trying to put a price on that until we get degrading. Well, I want to go one step further, which is like, okay, you know, yeah, this is logic. You could say if you're listening, that doesn't add up, right? Like the same thing could have been said more credibly about Snapchat and Facebook wasn't able to buy Snapchat. It was not going off for $3 billion, you know, things fall apart. Certainly, if he was willing to pay $22 billion for WhatsApp, why, you know, he certainly could have had snap for $22 billion that I suspect. No, I don't know, I don't know for sure, but like why didn't he put that $22 billion on the table for snap? Here's what I think is interesting. Snap execution wise is a much clearer path to what we were just talking about, like advertising based network, super attention based, all that stuff, but it's a much smaller network, much, much smaller WhatsApp is the largest, I believe the largest network in the world. And it's global. I pulled some stats here. This is all monthly active users. Facebook has 2.4 billion, MAUs, YouTube has 2 billion, WhatsApp has 1.5, making it the largest messaging network. I message, which I think is an interesting one to consider here, is 1.3 billion. Facebook message, we're also 1.3. Yeah, yeah. You realize that message is that big? Yeah, and it might be devices, not users. Apple is a little tougher to read on that, but on Instagram with a billion users. And we chat right there at around 1.1. So that's sort of the sat-kitting, a billion-ish now? Good question. Yeah. But the important thing to know is today, Snapchat's only 310, Twitter's only 330, and I actually think TikTok may only be like 500 million, but I could be wrong in that. But importantly, Twitter and Snapchat sub-scale sort of networks when you're thinking global scale. So I think that's an interesting point for us to consider engraiding. Yeah, a lot of execution risk ahead for WhatsApp. But they were the only kind of player out there that had the scale to really be a global threat. Yeah, and I mean, it's really interesting to think about of the what seven networks that have the seven social networks that have over a billion people, Facebook owns 4 of them. Yeah. And of the others that are that high, YouTube is off the table, Google already owns it. I message no way Apple is going to sell the most bundle product in the world. Yeah. We chat, you know, and Tencent, that's off limits because of the whole China issue. So yeah, WhatsApp's kind of the only, you know, and they already own Instagram, Facebook already own it's Instagram, so it's kind of the only one in play. Yep. Totally agree. Playbook? Playbook. Let's do it. All right. So listeners, this is where we sort of analyze. What did this acquisition enable them to do? Them being Facebook and what plays or what tactics did WhatsApp and Facebook use along the way to become this behemoth that that it's become. So David, you want to go first? Yeah, sure. I, we've touched on a lot of them. The only one that I want to highlight again is just these magical moments that only come once every sort of platform shift or every, you know, roughly every decade in tech and who knows what the next one's going to be, but these windows that open up where they're not obvious in the beginning, you know, again, remember, Jan was he wanted this to be a way messages, but like if you can get in there and figure out the right product, there's an opportunity to just serve such a clear need that a new platform enables and turn over to the kind of guard of technology and networks that if there is one of those and you think you have one of those opportunities and you see it, like good God take Brian's advice and do not give up. Go a couple more months. So funny. That was exactly exactly the point that I wanted to make here and specifically around both push notifications becoming available and also the wide, widely available data networks that lived on top of telephony and on top of SMS completely, obsoleting the way that all the carriers were billing for messaging at that time. Yeah, we didn't talk as much about that. You know, we hit on a little bit in the beginning of the episode, but like, yeah, it's just such a disruptive business model of like I could pay $10,000 a month for my, you know, child's 16,000 text messages or I could pay a dollar a year. Yeah, yeah, it's actually, it's funny. So sometimes we do this section and I'd like to do it today on value creation versus value capture because a lot of companies can create a ton of value in the world. But one of the sort of hard things to do is make sure that you're able to capture some of that value you create. What's up? Didn't really try. Like what's up created so much value. I mean, and frankly, they destroyed tons of value for carriers. But until that position was slightly debatable, I think. Okay. I think you're probably right. But Jan and Brian got this question all the time and they're kind of can't answer that they came up with was no, no, no, we're actually helping carriers because we're encouraging people to adopt smart phones and move over to data plans, which data plans are more expensive than tech plans. And I think it's a fair. It's a, it's a fair argument, but it's flawed in that that was going to happen anyway. So yeah. It is worth noting to that carriers just figured out a way to build everyone like they just repackaged all of their, their, their pricing. It's not like they actually materially lost that's money on this. Yeah. Yeah. But like I don't, I don't consider what's up an effective value capture machine and still is not clearly. Yeah. They're capturing basically zero value, but massive value creation for the world. And also again, we can talk about this as much. But the end and encryption and being the first platform to implement that platform wide across everything, you know, nobody saw that coming in 2014, but in the world we live in today, like I think that's really important and like really, you know, really good for the world that they did that. Totally agree. And to get into some of the nitty gritty of that, they actually then what's up later implemented the signal protocol, which is I believe also end and encryption and Facebook. Is the same thing as the foundation of Brian and the open source message. Yeah. Yeah. Yeah. Facebook can read something like and we're not privacy experts, but from sort of a cursory read over it, what really people that are really into privacy would want is Facebook to not be able to read, of course, the contents of your message, but also not be able to read like who sent what when David, if I sent you a message on WhatsApp right now, Facebook would have it in their server logs, I believe listeners, please email us acquired or tweet us. I believe they would know that I just sent you a message. Interesting. Which is kind of what they, one of the things they really wanted out of this anyway. There is more data they could get out of WhatsApp, but I do think they get a good amount of data as it is today. Interesting. And now David, grading. Oh, how are you going to make me go first? Well, okay, let's, let's tee that first. So what's, what's the criteria? Like what do we consider a plus? What do we consider enough? Well, okay. For me personally, anything in the A range is off the table just because I'm offended by the execution here. But, but that's just me. I think you could still make an argument. It's in the A range. I think the criteria by which I at least I'm going to create is like how, you know, important was this defensive move and how valuable was it? So taking the perspective of grading as we always do from the acquirers perspective as Facebook, I think this is still probably either a B or a B plus. And they would probably, maybe people there would argue it's in the A range just by virtue of like, yeah, they gave up 10% of their equity value, but they took out the one viable global network in this generation that could have been independent. The stock has gone from 200 billionth market cap to 630 billion market cap in the intervening six years. Of course, in many ways do two not what's up, but like just the by virtue of having the clear runway to do that has been good for Facebook to very, very good for Facebook. Pains me to say this because I want to give it an F, but that's that's my grade. All right. Well, I'm glad I wrote down my grade before before I heard you say yours. So I can be sort of unbiased here. Two things to keep in mind listeners. One, they sold 10% of their market cap to be able to buy this company. Another way to think about this is Facebook was is a phenomenally profitable business. And another way to frame this is they basically spent all of their 2019 net income or profit to buy this company. So was it worth spending an entire year of profit to go and buy them? I am going to grade this in a I don't think it's an eight plus, but I'm going to grade this in a and the reason I'm going to do that is obviously the same sort of defensive play argument, but the way that I sort of think about it, it's like, what are the key risks to Facebook at this point? There's regulation. Like I think there's regulatory reasons that they could go away. There's obsolescence because attention shifts elsewhere. I mean, yes, they're real, of course. And if you look at history and obviously a lot of this will depend on the coming election and whatnot, but like even Ben Thompson always put this a lot. The DOJ didn't kill Microsoft. I mean, Microsoft's actually back and better than ever, but didn't kill the old version of Microsoft. Google killed the old version of Microsoft to like regulation is such a slow process and technology moves so fast that is that a real risk. Right. So like, okay, so we're going to say regulations not really their key risk. It's really fading into obsolescence. And it's the thing that happened to social networks before them. And it's the Facebook has a lot of core competencies, but their very, very most central is not fading into obsolescence. Like buying Instagram, brilliant, you know, companies saving move on multiple fronts, bought them another generation. I think WhatsApp is sort of this similar thing where, you know, they carved off 10% of their, the value of their company to go get it. But like should they have done that? Absolutely. Should they do it again? They should go do it five more times. Every time there's, there's one of the seven, you know, billion plus user social networks or billion to be in the near future user social networks is up for sale. They should go make a horcrux and carve off a piece of themselves or do whatever they have to do to go and get that thing and keep their, keep their dominant position. I mean, it is like the consumer sentiment couldn't be freaking worse on this company based on a lot. I mean, there was delete Facebook. There's election stuff. There's, there are trouble left, right and center and it is making more money than ever. There are more people using it than ever. Sure, growth has slowed, but like, oh my gosh, it's because they saturate a humans on the internet. And I just think that this is such a complete and total no brainer. And even if they never make a dollar off of WhatsApp to neutralize that threat and, and get to continue to own the world's digital attention, I think is, is not invaluable, but is very, very, very valuable to them. And one way to sort of look at this is if you think there was a 10% chance that WhatsApp could have totally wiped out Facebook at some point in the future, then it was break even to buy it even if they never, ever generate any cash flow. I agree. I just can't bring myself to give it an A. That's not for like, logical reasons. Two comments to add on to that. One, in talking to a bunch of friends at, you know, a Facebook and former Facebook friends and thinking about this episode, you know, one thing that is a core competency. And I think from my understanding, really viewed as a core competency within Facebook is extremely robust competitive intelligence. Like they know this. They know it's everything you just said and they are paranoid about it. What was that VPN app that they were using that they used for competitive intelligence to help them understand that? A marathon or something like that? An onvato or an avo? Yeah. They eventually bought it and then they got in food a bunch of trouble because they were yeah. So that's one. And then two, you know, I think this brings up an interesting question, right? Like if you'll indulge me for a minute, given my, of course, non-logical from an investor standpoint, discussion of why I can't get this name. Emotional being. You know, I think there's a little bit of question given all this and consumer sentiment on Facebook. Well, how should the public and housing governments think about Facebook? Is it more like a tobacco company than a technology company, you know? Like if you like a tobacco companies, they are still many, many billions, 10 to billions of market cap publicly traded companies because just like you've been saying, then they are like wild cash flow monster producing machines. But they're also tobacco companies, right? Like they're also good at not dying. Right. And so I'm not sure I'm ready to go so far and say like social media or Facebook is tobacco. But certainly there are some like questions about the societal good of, you know, data privacy, ad targeting, the emotional effects on people of social media and in particular Instagram and Facebook. You're looking at a guy who's number one time consuming app on his phone is Twitter. So, well, it's not a Facebook app. Yeah, that's true. Yeah, I mean, maybe there's an LP show deep dive there somewhere of the, have someone come on and debate the, the ethics of social media with us. I think that'd be super fun. Let's do it. Man, well, there it is. There's WhatsApp. It finally did it. I'm glad we waited this long. Yeah, me too. It's not like we would have gotten any more information, but at least we know that Facebook wasn't going to effectively immediately gain any new cash flow out of it. Yeah. I was waiting this long to it also made it super clear what this was really about. And if we'd done this episode two years ago, we probably would have created this like much lower because we wouldn't have seen how important this defensive move was. It's interesting. Or at least I don't think I would. Yeah, maybe not. Maybe not. If you want to do car vats. Yeah, let's do car vats. We haven't done them in a while. Good way to kick off season six. It is. You want to go for it? So this may come as a shock to you, Ben. I'm glad you're sitting down. I have been wearing different sneakers recently. Dude, I almost did a sneaker carve out too. And it was almost not flynets. Yeah. You know, what are you wearing? I'm wearing Reebok flow rides. Float rides. They're excellent. I wear them both for running and for just around town because they're like super stylish. I loved my flynets. I still have my flynets. And Nike is like moving away from flynets and free flynets. Then you ones are not good. No, they look terrible. They're like a really messed up back to the future thing. These flow rides. Okay. So sticker price, a hundred bucks. I got mine on Amazon for like 65 bucks. Runners world review this. I found out about them. Runners world reviewed these things. And they were like, you're not going to believe this. But these Reeboks are the best $100 or less running shoe you can buy on the market. And so I was like, all right, great. I need some new running shoes. I'm going to try that. I got them. And I'm like, these might be my everyday shoes. Like, they're that good. Are they float rides? Float rides. There's a couple different models. I'll link to the one that I got. But yeah, I'm loving them. Pretty nice, man. You sure you're not Reebok endorsed, right? You didn't get a deal. You didn't get a deal. Working on that. Working on the studio. Hey, if Kanye can have a studio, I think acquired can have a studio. Oh, yeah. Now we should get on that for sure. Okay. So my carve out is a product category that I'm going to recommend because I don't know the brand. But I recently went to the eye doctor. I work contacts after getting my contact fitting. I was talking to my eye doctor and she brought up, do you have computer glasses? And I sort of seen other people with them didn't really understand and got like totally sold on the value. And I've been wearing them and like absolutely love them. They do this interesting thing. I wear them over my contacts. And what they do is they do two things. One, they change my, where my eyes naturally are at rest to like 18 inches in front of my face instead of being like off in the far distance, which is what my contacts naturally have them do. And I think what our eyes naturally would do if you don't require glasses or contacts. It makes it so that when you're staring at a screen, you don't get eye strain from constantly having your muscle, your eye muscle sort of tensed up to be like looking at something close to you. So like I find that working is much more comfortable and I can like read and write longer. The other thing that they do, so there's this like slight magnification from changing where the resting focus is. So the screen, everything on the screen looks a little bit bigger. The saying, no, I'm becoming an old person. And the other thing is it filters out blue light. It doesn't really change materially the color or the hues of what you're looking at. It makes it kind of safer for your eyes, better for your brain. You can sleep more easily at night. They're awesome. I actually now feel very strange sitting down at my computer without wearing the glasses. That's awesome. So how do they work? So they're not prescription. It's just where they are prescription. They're, I think they are prescription, but they sell ones that aren't prescription. But basically it's they they have the two features. One is the blue light filtration and the other is changing your resting. So the focus to be about eight inches from your face. So the they're not designed for vision, the like outside of working in the computer vision correction. That would be like you could have everyone there. Interesting. Yeah, I actually take them off when I stand up to like walk to a meeting or something because it's kind of like freaky when you look all the way down the hall. It's not like as dark as not wearing your glasses or something like that, but it is kind of like a you got to refocus your eyes aggressively to go look at something far away. I'm going to have to check these out because a sounds like a great product and benefit. B, I've always thought that I might like look good with glasses, but I don't like it. Don't have I have normal vision. And I'm like, I'm not going to be that guy. Just to wear glasses for. Are you an excuse? Yeah. So now I have an excuse. It does it makes you look really like big eye though. Like kind of like bug like what I'm right now. I don't know if my eyes look bigger to you, but they I was like. I've seen yeah, like see it caught my reflection. I was like, whoa, eyes look huge. I didn't notice but now that I'm looking, yeah, you look like a you look like a snap tab filter. Perhaps like what I've always wanted. Well, that's a good. All right, let's bring it home. Listeners, if you aren't subscribed and you like what you hear, you should, especially if you're listening in Apple podcasts, we deeply appreciate you hitting the subscribe button and helping us of course get delivered to you every time that you want to listen to a new episode. But then also it really helps us in the iTunes technology charts. So hit that subscribe button if you like the show. If you want to become a limited partner, subscribing gets you access to our bonus show where we dive deeper into the nitty gritty of building companies and you can listen by clicking the link in the show notes or going to slash acquired and all new listeners get that seven day free trial. With that, we will see you next time. I'm Bernie.