Goldman Sachs thinks Facebook just made a great strategic play
Facebook founder and chief executive Mark Zuckerberg must be feeling pretty smug this morning.
He's won approval for the bold acquisition of Whatsapp from a number of analysts, and can now add leading investment bank Goldman Sachs to the list of those who thinks the move is a strategic winner.
As a move, Goldman analysts say that "the acquisition makes strategic sense as Facebook continues to built out its application microcosm". Here's why others agree.
That should allow Facebook to increase some key metrics – increasing engagement and share of time spent – as Whatsapp brings a fast mobile messenging platform with "a strong international footprint" to the social media giant's arsenal.
On Facebook’s 4Q13 earnings call, management had stressed the company’s strategy of building mobile apps beyond the main Facebook app and highlighted Facebook Messenger user growth of 70% in the past three months, and noted new office build-outs in Asia and Europe.
Goldman notes that Facebook's Whatsapp purchase sees them pay around $42 per user, while they shelled out just £7 a user for Instagram in August 2012.
Key risks to Facebook's success remain – Goldman identifies macroeconomic worries, user fatigue, possibly privacy missteps, and potential user backlash over the introduction of new ad formats as concerns.
Goldman maintain their buy rating and 12-month price target of $70 for Facebook. Facebook shares closed at $68.06 dollars yesterday.