While the benefits of social messaging apps are evident – pricing is skyrocketing while monetizing remains a puzzle (23.2.2014)

The social networks, predominantly Facebook, are said to be stagnating in the developing countries (e.g. Latin America, India and Asia). This leads them to acquire large messaging platforms and overpay, with the hope of gaining market share in the future.
Rakuten, one of Japan's largest Internet companies, has recently announced that it will acquire messaging platform Viber for $900 million. This valuation indicates an estimated $8.57 per (hopefully active) user, based on 105 million monthly active users. The fact that Viber is nowhere near monetizing its users seems irrelevant. In contrast, Facebook's recent acquisition price values WhatsApp at roughly $42 per user, with $16 billion paid in cash and stock, and another $3 billion in restricted stock that vests over the next four years. These two acquisitions followed Microsoft's acquisition of Skype nearly a year ago for a remarkable price of $8.5 billion ($14.7 per user).
Such high pricing (WhatsApp’s but even Viber’s) puts an unimaginable pressure on these apps, such that their business models are clearly unequipped to face. This also allows competitors to set up seemingly exaggerated valuations, such as messaging company Line with its $28 billion expected IPO (over $90 per user!!!).
While there are numerous other market players (such as KakaoTalk Messenger, with its 100M users) that may be still acquired for reasonable pricing, one truth stands out. Those acquisitions will prove successful if, and only if, they endure and truly prosper, or as Facebook’s CEO Mark Zuckerberg put it: “Once we get to being a service that has a billion, two billion, three billion people one day, there are many clear ways we can monetize…”. The problem is this: if we can learn something from history, it’s that every few years (and the time frames are getting shorter and shorter) dominant players vanish and newcomers overtake their place. Thus, top dollars are currently spent with the clear understanding that they will not contribute to the acquirer’s competitive position. And moreover, no one seems to mind which messaging app is being acquired, as if they are mere copies of one another. This means to me that not only that the pricing has gone horribly wrong, but also that both strategic and organizational fit between the acquiring firms and the acquired messaging platforms are doubtful and indicate process mistakes. Only time will tell who spent an unimaginable fortune on a growth tool and who wasted capital resources that would have been so desired in the future to come.