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Are the world’s chat apps really worth $48 billion?

AP Photo/Invision/Charles Sykes
This looks profitable.
By Christopher Mims
Published Last updated This article is more than 2 years old.

Outsized valuations for tech companies are back with a vengeance. If you thought Facebook’s $1 billion acquisition of Instagram (which at the time had 16 employees) was an eyebrow-raiser, you might be shocked to hear that companies like Pinterest and Snapchat are now estimated to be worth four times as much.

In particular, chat apps, the hypothetical heir to Facebook for teens’ affections, are seeing shocking valuations. Apps like WhatsApp (US), WeChat (China), Line (Japan) and KakaoTalk (Korea) are crossing national borders to try and capture as many millions of users as possible, regardless of geography. The prize is now not merely “becoming the next Facebook,” but potentially “becoming the thing that replaces Facebook.”

A collation of real and rumored valuations for these companies puts their collective pre-IPO, pre-acquisition or pre-spinoff worth at between $29 and $48 billion. This analysis excludes services that are primarily devoted to other functions, like Facebook and Google, both of which have their own chat services, but includes WeChat, even though it’s part of the larger Chinese internet company TenCent, since WeChat competes directly with other chat apps, has its own brand, and has even been rumored as a candidate for its own IPO.

SnapChat is different from other services in this group in that it’s primarily a picture-based chat service. Its innovative model and explosive growth mean that investors are valuing every one of its users between two and 10 times as much as users of comparable services KakaoTalk and WeChat.

Surprisingly, the service with the most users has the lowest absolute and per-user valuation. Valued at just $1 billion, WhatsApp is either a steal for investors or a business designed not to profit in the way its competitors are. WhatsApp currently charges users just $1 a year to use its service.

The world’s chat services, which have raked in between 844 and 862 million users in total, would seem to have collectively assembled almost as many users as Facebook—except that most people who use chat services probably use more than one. Even so, the sheer volume of investor capital pouring into these services, their explosive rate of growth (and an overall trend among the world’s young people toward chat and away from last-generation social media) suggest these services deserve at least as much attention as last-generation social mediums.

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