Four months ago, Facebook (FB) turned heads by dropping a cool $19 billion for messaging app WhatsApp. And it’s been a pretty up-and-down four months.
Facebook stock is currently going for around $2 per share less than it was at the time of the acquisition … but all in all, it’s still doing all right. Since the start of the year, FB stock is beating the market with a 23% climb. Over that same time period, the S&P 500 has added just 6%.
So what’s up with WhatsApp? Has it been slowing Facebook stock down, or are investors just starting to see its potential?
Truth be told, the answer is probably neither.
To understand why, just take a look at recent comments from Nicola Mendelsohn, the company’s VP of Europe, Middle East and Africa. She told Fortune that the Facebook WhatsApp acquisition simply ties into the company’s mission to “make the world more connected.”
While that’s a noble goal — and a goal that rival tech giants like Google (GOOG), Amazon (AMZN) and Apple (AAPL) clearly share — those fluffy ideals aren’t the drivers of the company’s current bottom line.
In fact, the goal isn’t even to actually integrate WhatsApp into the Facebook platform and thus its revenue stream — not at this point, anyway. Instead, Mendelsohn’s comments show that Facebook’s WhatsApp deal is more of an acknowledge that it is “not the best user experience for people to just do everything in one place [on Facebook].”
That jibes with CEO Mark Zuckerberg’s comments back when the deal was first announced. As CNN Money reported:
“On the conference call, Facebook said it is not looking to drive revenue from WhatsApp in the near term, instead focusing on growth. Zuckerberg said he doesn’t anticipate trying to aggressively grow WhatsApp’s revenue until the service reaches ‘billions’ of users.”
So far, WhatsApp is only halfway to the billion mark, meaning its still in growth mode, not monetization mode … and meaning it has little impact on Facebook stock.
That’s not necessarily a bad thing, though. Tech giants simply must balance their big dreams with some success rooted in reality.
FB stock has clearly shown some real success, given its market-beating gains this year. Others like Amazon, for example, haven’t been so lucky. So far this year, investors seem to be over the company’s laundry list of big plans and absence of profits. For the cherry on top, the company’s dream of drone delivery was grounded this week as well (“Didn’t see that coming” … said no one).
For now, Facebook’s WhatsApp dream still at least has potential. And beyond that, FB stock has plenty else to keep it chugging along.
So what’s up with WhatsApp right now? Well, users still love it. And Facebook stock fans may love its potential. But when it comes to WhatsApp having an impact on the company’s bottom line any time soon, not much is up at all.
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
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