Pavel Durov, the man behind the messaging service Telegram, has estimated that his own startup is worth around $3-4 billion. However, Durov has long argued that money is overrated, going so far as to throw 5,000-rouble ($85) banknotes out of the VK headquarters’ windows in St. Petersburg to prove his point. But to calculate Telegram’s true worth is not easy. What we know for sure is that the founder has no desire to sell it and the messenger does not generate significant revenue. In an interview with Fortune magazine, Durov admitted that he spends $1 million a month of his own capital to keep Telegram running. Therefore, evaluating the company based on its cash flows is impossible; it can only be done by looking at its users.
The latest player on the messenger market is Line, a Japanese app managed by Korean Internet holding Naver. The application has 220 million users, most of them in Asia. In several major markets, including Japan and Thailand, Line is the undisputed leader. Last year, Line’s revenue was $1 billion. Its business model includes the sale of $1-2 stickers. Following Line’s summer IPO, its capitalisation increased to $9 billion but fell to $7.7 billion by mid-December.
Line has its own weaknesses: most of its revenue comes from a saturated Japanese market and the potential for new users is low. Before the IPO, the average increase in user numbers had crawled along at 2%. Besides, not everyone spends money: in March, only 4% of Line users paid for products and services. Most importantly, Line is no different from most messengers in that it is unprofitable. Therefore, like any other company in the industry, it can be assessed by the “cost per user,” which works out to about $35 per person.
In early 2014, WhatsApp was bought based on a user price of $55 while Viber was valued at $9 per member. Tango, another messenger, was estimated at around $5 per person. These figures reflect the golden age of instant messengers. The days when Facebook, Rakuten or Microsoft would offer a premium for a startup are over. Large companies now develop their own personal assistants and chat bots.
One can assume how dull the investment prospects of such ventures are. Before their IPO in 2014, Line’s capital projections exceeded current ones by almost 60% despite a modest customer base and smaller revenues.
Durov announced in February that the year-to-year pool of Telegram users grew by 70% and exceeded 100 million. At this rate, the user base is approaching 150 million. Given that the growth of certain messengers is slowing down (Tango’s audience, for example, is plunging), a conservative estimate of 130 million would be more realistic. The price of each user can be found once the app goes on sale, but Durov, who has more than $250 million after the sale of VKontakte, the Russian version of Facebook, has no urge to part with his recent creation.
Using WhatsApp as a benchmark, Durov’s company would be worth $7 billion. Compared to Line, the number is more like $4.5 billion, and compared to Viber – $1.2 billion. The most conservative estimate, putting it side by side with Tango, is $650 million. Considering future cash flows, the Telegram founder’s aspirations could fall flat.
Telegram’s edge is its experienced and successful founder, its expertise in secure messaging, its reputation, its rapid growth and its relatively small size, which makes the startup a natural takeover target. According to SECRETMAG, Google had even considered making a bid for the messenger app. But the market has lost ground and even Viber’s value seems inflated. Hence, the best estimate is $1.2 billion.