I agree that a good portion of the valuation must have been largely driven by fear and their potential to destroy that much value rather than create it. The factor that both challenges and supports your argument is how small their team was at acquisition (reportedly 32 engineers, 55 total). Charging $1 a year per user after the first year was bringing in revenue, and it wouldn't take much to be a "traditional business" ie. profitable. They also had zero-rated revenue-sharing deals with Reliance Telecom in India years ago as another potential source of revenue – I suspect relationships like this played a larger role in the acquisition than as they thought they would lay the groundwork for internet.org.

Your comment made me curious about what their actual revenues and costs were leading up to the sale. Putting (massive) stock-based compensation expenses aside it looks like their revenues and operating costs were actually pretty close[1]. That's not delving into potential revenue growth connected to payments and B2C interaction following the path which was already being laid out by wechat[2]-Facebook has decided to attempt this with messenger instead of whatsapp. I'm not saying that they would have quickly found enough revenue to justify a $20B valuation, but that it resembled a traditional business a lot more than many other social startups, and they were kept lean and probably better positioned to capitalize on growth than others.

[1] http://techcrunch.com/2014/10/28/whatsapp-revenue/ "For the year ending December 31, 2013, WhatsApp had $10.2 million in revenue … net cash used in operating during this period was only $9.9 million"

[2] http://dangrover.com/blog/2014/12/01/chinese-mobile-app-ui-t...