Firm Says China’s WeChat Messaging App Is Worth $60B

Source: Thinkstock

Source: Getty Images

Facebook’s (NASDAQ:FB) enormous $19 billion deal with messaging app WhatsApp turned heads last month as some questioned whether the social app was really worth all that cash. Facebook CEO Mark Zuckerberg has said that WhatsApp could be worth even more than the $19 billion he paid for it, and now analysts are trying to determine the valuation of various messaging apps based on WhatsApp’s $19 billion.

In a research note seen by TechCrunch, Crédit Lyonnais Securities Asia estimated the value of the Tencent (TCEHY.PK) owned Chinese chat app WeChat. Based on the fact that WeChat currently has more revenue streams than WhatsApp, the firm estimated that the app could be worth up to a whopping $64 billion. CSLA analysts Elinor Leung and Terry Chen wrote the note and said that WeChat is worth more than WhatsApp despite having fewer users because it generates much more cash per user.

WeChat has 300 million users compared to WhatsApp’s 465 million, but the firm believes that WeChat is on track to reach 450 million by the end of the year. WhatsApp has taken a very cautious approach to monetization, something that Facebook says it will maintain. Users pay for the service itself, which remains ad-free. The app even quotes Fight Club on its website: “Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need.”

WeChat has also taken a cautious approach to advertising. For now the service is limiting the promotional activities of public accounts, but CSLA said that Tencent “will likely turn more aggressive on monetizing through social advertising once user penetration is mature.”

While the firm questioned whether display ads would be the best advertising technique for messaging apps, the researchers did say that other WeChat functions — such as a payments service called red envelope that’s in the process of being integrated with WeChat — could lead to more revenue for the app. Tech Crunch pointed out that Facebook and WhatsApp could work to develop a similar service.

The analysts’ bullish take on Tencent was also part of the high valuation given for WeChat. CSLA forecast that Tencent would be worth $92 billion by 2017.

WeChat isn’t the only messaging app having its valuation judged based on Facebook’s recent acquisition. Shortly after the WhatsApp deal was announced, BlackBerry (NASDAQ:BBRY) CEO John Chen said in an interview with CNBC that he would accept a similar $19 billion offer for BlackBerry Messenger. The $19 billion scenario was just a hypothetical, as based on WhatsApp’s valuation, BBM would cost about $3.4 billion, according to CNBC. Chen said he would rather focus on growing BBM as a part of BlackBerry than sell it, although he wouldn’t be able to turn down as large an offer that Facebook just shelled out for WhatsApp.

Zuckerberg was willing to shell out so much cash for WhatsApp because of the service’s growth potential; he believes WhatsApp could reach 1 billion users within a few years. The CEO has put his money on messaging apps being the next big thing in social media, but it’s uncertain if all messaging apps, including WeChat and BBM, deserve such a high valuation.

More From Wall St. Cheat Sheet:

Follow Jacqueline on Twitter @Jacqui_WSCS