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How do 55 people share $19 billion?

Posting in Technology

 

San Francisco Night Basil D Soufi Wiki.jpg
The chattering upper classes: San Francisco (above) and the Bay Area could now have 55 new or reaffirmed millionaires, who made their mint by developing "chat app" software.
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You might still be scratching your head from last week and asking: "Facebook paid how much for a what?"

But of all the astounding truth surrounding the social media giant's $19 billion acquisition of a "chat app" company called WhatsApp, perhaps the most underreported and staggering of them all is that WhatsApp has a total of merely 55 employees.

Once upon a time, not so long ago, it would be safe to assume that any organization that commanded an asking price in the multibillions would have built itself through the toil and troubles of at least thousands of workers if not hundreds of thousands.

But that was when men were men, women were secretaries, and highly valued corporations pulled minerals from the earth or manufactured things with their hands and machines. They might have even run bloated bureaucracies full of paper-pushing, long-lunching middle management.

Alas, those days have given way to an era when 55 people can write some software and convince a 29-year-old CEO named Mark Zuckerberg - Facebook's boss - that they are collectively worth a score of billions. Young Zuck even seems to think he got the Fab Fifty-Five in a steal, as Bloomberg suggested.

Of course, WhatsApp didn't write any old software. No. The Mountain View, Calif. company devised a program that lets smartphone and tablet computer users tap messages to each other via a handy "app," as opposed to using that ancient method called text messaging or other worn out technologies.

People seem to like it. They've downloaded the digital doodad 450 million times according to WhatsApp. That expansive community is a nice fit with Facebook's supposed base of 1.2 billion users. Zuckerberg, like many industry pundits, believes that the cyber world's future is on mobile devices. Indeed, traditional user growth is slowing at Menlo Park, Calif.-based Facebook.

It could be that Zuckerberg knows what he's doing. After all, this is a guy who figured out than you can potentially make huge profits by convincing your customers to pay you not in cash, but by handing over highly valuable data about themselves for free. Give those people something remotely useful - like Facebook pages where they can blab on about the cheeseburger they just ate, about Shakira's butt (those are two different items), or whatever - and they flock to you. The advertisers climb aboard, rewarding you with large checks. Who knows, maybe you even get to sell your users' personal data.

It's been working for Facebook. Earnings soared to $523 million in the fourth quarter  - up from $64 million in the year-earlier period - on sales of $2.6 billion, CNN reported recently. By catering to the mania around mobile chatting, Zuckerberg hopes to enrich those numbers. 

Thus, he found $19 billion for 55 people at WhatsApp, a company that is a fellow denizen of Facebook's in the San Francisco Bay Area, a place known for technology deals that can seem intermittently kooky or trend setting.

Which gets back to the question: How do four dozen plus seven people share $19 billion? If WhatsApp were to dish out the dough evenly, they'd provide $345 million per head. Just think of all the high-speed Internet that could buy each individual! The cyber rich get cyber richer.

Alas, workplaces are not democracies. As the website PandoDaily noted, WhatsApp CEO Jan Koum owns 45 percent of the company, and early employees each have a one percent stake. Using those numbers, the top man might get $8.5 billion and certain worker bees could net $1.9 million. No one on the WhatsApp crew is likely to go wanting. 

In whatever manner WhatsApp divides the loot, the transaction raises another question: Is $19 billion for 55 people good for the wealth of a nation, or of a world? Is this a golden deal indicative of a free market economy that can reward innovative people justly and encourage more innovation? Is it capitalism run amok, enriching a handful of lucky stiffs for some niche reason, kind of like showering treasures on overpaid athletes? Shouldn't $19 billion somehow go toward those working on the world's real challenges like hunger, strife, disease, clean water, climate change and energy, among others?

Or is building a $19 billion chat app somehow part of the greater global economic vitality that helps finance those things? Can it really have a "trickle down" effect - how many of us can really get jobs cleaning the houses of the handful of overnight multimillionaires? (Feel free to wade into the comments section below).

Yes, the economic world has changed in the Internet era. But there is at least one thread to the past: I can think of 55 people who, like some of their predecessors from a bygone era, will be able to afford a long lunch or two.

Photo is from Basil D Soufi via Wikimedia

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— By on February 26, 2014, 5:27 AM PST

Mark Halper

Contributing Editor

Mark Halper has written for TIME, Fortune, Financial Times, the UK's Independent on Sunday, Forbes, New York Times, Wired, Variety and The Guardian. He is based in Bristol, U.K. Follow him on Twitter. Disclosure