#6 — Facebook transforms itself (or tries to) with a huge acquisition. I wrote long ago that we’d never see Facebook in the Dow 30 Industrials. The company is awash in users and profits but they’ve lost the pulse of the market if they ever had it. Trying to buy their way into the Millennial melting data market Facebook offered $3 billion for Snapchat, which turned them down then rejected a $4 billion offer from Google. Google actually calculates these things, Facebook does not, so where Google will now reverse-engineer Snapchat, Facebook will panic and go back with the BIG checkbook — $10+ billion. If not Snapchat then some other overnight success. Facebook needs to borrow a cup of sugar somewhere.
Now $19 billion may still seem like too much money but remember the alternative for Facebook is oblivion. Facebook stock is overpriced, making the acquisition cheaper for the company than it looks. On a per-user basis it’s still substantially below Facebook’s own numbers. And part of the reason for that big number is simply to have it be a big number — big enough to make the point to Wall Street that Facebook is determined to buy its way in front of the wave.
The only limit on what they would have paid for WhatsApp, in fact, was that they had to leave something for the next big acquisition, because this is not the end. Look for another $5+ billion acquisition soon for Facebook (maybe higher if they can use all or mostly stock).
This is what happens, you see, when the mojo goes, leaving only money behind. You spend it trying to appear youthful again.