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Facebook Spent $21 Billion on a Company That Just Lost $232 Million

3 minute read

Facebook’s pricey purchase of WhatsApp, which closed at a whopping $21.8 billion, turned heads earlier this year because few thought the startup was making much money. Turns out, WhatsApp has actually been losing money. A lot of it.

The mobile messaging platform, which had 450 million users when the acquisition was announced, posted a loss of $232 million in the first six months of 2014, according to a new Securities and Exchange Commission filing. The company’s primary revenue source is a $0.99-per-year subscription fee that only kicks in after the first year of use — the app doesn’t show users any ads. Apparently that fee doesn’t amount to much—WhatsApp generated $15 million in revenue in the first half of 2014, according to the SEC filing.

Most of the company’s massive loss came from stock sales and issuing stock options to employees, but even when just accounting for day-to-day operational activities, the company doesn’t make money. WhatsApp had a net loss of $139 million on revenue of about $10 million last year.

Facebook CEO Mark Zuckerberg, of course, knew all of this before busting out his checkbook. Still, Zuckerberg’s not at all apologetic about spending such a large sum on such a tiny business. “This may sound a little ridiculous to say, but for us, products don’t really get that interesting to turn into businesses until they have about 1 billion people using them,” he said Tuesday during a quarterly earnings call with Facebook investors. “Once we get to that scale, then we think that they will start to become meaningful businesses in their own right.”

This Is What Your Facebook Profile Looked Like Over the Last 11 Years

The Original Facebook Group Page, 2004.
The Original Facebook Group Page, 2004. Before people realized how awesome pictures are.Courtesy of Facebook
Facebook Profile Page, 2005.
Facebook Profile Page, 2005. Back when Facebook looked a little bit like MySpace. Courtesy of Facebook
Facebook Profile Page Facelift, 2005.
Facebook Profile Page Facelift, 2005. The "the" is finally dropped.Courtesy of Facebook
Facebook Profile Page, 2006.
Facebook Profile Page, 2006. You no longer need to be reminded "this is you" at the top of your profile page.Courtesy of Facebook
Facebook Profile Page, 2007.
Facebook Profile Page, 2007. Every profile update still had to begin with "is," forcing you to talk about yourself in the third person. Courtesy of Facebook
Facebook Profile Page, 2008.
Facebook Profile Page, 2008. The wall. Courtesy of Facebook
Facebook Profile Page, 2009.
Facebook Profile Page, 2009. It only took five years for Facebook to create easy-to-find privacy settings. Courtesy of Facebook
Facebook Profile Page, 2010.
Facebook Profile Page, 2010. Facebook starts to get pretty. Courtesy of Facebook
Facebook Profile Page, 2011.
Facebook Profile Page, 2011. Zuckerberg realizes that people love pictures, usually of animals.Courtesy of Facebook
Facebook Profile Page, 2012.
Facebook Profile Page, 2012. The timeline allows you (or your parents) to trace your life from birth to death.Courtesy of Facebook
Facebook Profile Page, 2013-2014.
Facebook Profile Page, 2013-2014. Facebook introduced a new app, Paper, on Monday.Courtesy of Facebook
Facebook Profile Page, 2014-2015. Facebook updated both the newsfeed algorithm and the privacy settings.
Facebook Profile Page, 2014-2015. Facebook updated both the newsfeed algorithm and the privacy settings.Courtesy of Alex Fitzpatrick/Facebook

In addition to WhatsApp, Zuckerberg noted Instagram and Facebook’s search function as platforms that have the potential to reach one billion users and become huge money faucets. And he emphasized that Facebook is planning to make more big-ticket bets in the future. The company shocked investors when it said on that Tuesday call that its expenses will increase by as much as 70% year-over-year in 2015 because of a ramp-up in staff and, most likely, acquisitions. Facebook’s shares slipped more than 6 percent on the news.

In some ways, Zuckerberg’s willingness to spend huge sums barging into new sectors echoes Jeff Bezos’s plan to expand Amazon’s reach into an increasingly broad set of categories, like movie streaming and smartphones. The difference is Facebook has built a robust and still-growing advertising business that constantly defies Wall Street’s expectations, so it has room to roam. The social network’s ambitions will only grow from here.

Read next: This Is the Single Craziest Number in Facebook’s Earnings Report

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