Facebook owned mobile messaging app WhatsApp has reported a net loss of $232.51 million for the six month ended June 30, 2014 (H1 2014), a significant increase from $58.8 million loss in the same period last year, Facebook has disclosed in an SEC filing.
A big part of this loss was the issuance of common stock below fair value of $109.9 million and a share-based compensation expenses of $96.6 million for the period. In comparison, there was no similar issuances in the same period last year while the share-based compensation expenses was at $40.5 million.
The net revenues of the company was at $15.29 million for H1 2014, as compared to $2.76 million in the same period last year. Note that this is the first time Facebook has disclosed WhatsApp revenues after it closed the $22 billion acquisition earlier this month.
Annual results: For the year ended December 31, 2013, WhatsApp posted a net loss of $138.2 million, more than double of $54.7 million loss in the previous year. Of this, share-based compensation expenses accounted for $98.8 million, up from $38.3 million in the previous year.
The net revenues was at $10.2 million for the year, as compared to $3.82 million revenue in the previous year. The company used a net cash of $9.9 million in operational activities during the year, as compared to $3.5 million in the previous year.
WhatsApp chasing growth not monetization
It’s worth noting that WhatsApp’s revenues are significantly smaller than its competitor LINE that posted net sales of $191.7 million (20.9 billion Yen) in Q3 2014 itself, registering a 104.2% increase year-on-year (YoY) and a 17.7% increase sequentially. This is primarily because LINE makes most of its revenues from in-app game purchases and sticker sales, while WhatsApp makes money only through annual subscription fees. It has deliberately stayed away from offering games or stickers in its app.
During the Facebook’s earnings call yesterday, Mark Zuckerberg had mentioned that they have number of services like WhatsApp which they think on their way to reaching 1 billion people over a five year time frame. “And once we get to that scale, then we think that they will start to become meaningful businesses in their own right”. He mentioned that the right strategy is to first focus on connecting more than 1 billion people before very aggressively turning them into businesses. (Also read: WhatsApp’s Business Head Neeraj Arora on carrier deals & voice, biz dev plans, India, payments).
To put things to context, WhatsApp claims to currently have 600 million monthly active users globally, with India being its largest market with 65 million monthly active users whereas LINE has around 170 million monthly active users globally. Earlier in the month, LINE had claimed to have 30 million registered users in the country, but that doesn’t really matter for a messaging app – it’s the number of monthly active users that does which the company is yet to disclose.
WhatsApp deal breakdown
Interestingly, Facebook has also provided a breakdown on the money it has spent on WhatsApp. The company mentioned that it paid $2.03 billion for WhatsApp’s user base which Facebook believes has a useful life of seven years, $448 million for the tradename, $288 million for the acquired technology and $21 million for others.
It also allocated $15.31 billion for “goodwill” which the company attributes for “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”.
Net Cash: As of June 30, 2014, WhatsApp has a net cash of $151.7 million as compared to $7.2 million during the same period last year.