WhatsApp: show me the money!
WhatsApp has ditched its annual $1 fee for users. From the get go, the charge was more about defending its possibilities of generating revenue (introduced at a time when it was desperately looking for a buyer) than actually making money from it. As things stand, only around 3 percent of users have ever been asked to pay. To be fair, many users don’t have their credit card data into the app stores (some of them don’t know how to, some don’t want to) so in fact, they cannot even make the payment, and in many cases, these users, after a few days, were usually re-invited to join the application without paying anything. The company, knowing all that, has always put growth over revenue, which is what eventually made it such an attractive acquisition target.
Two years after Facebook bought WhatsApp, Jan Koum, speaking at the DLD conference in Munich, said the company was now going to focus on the B2C market. In reality, Facebook has little choice if it wants to make money from a tool used by around a billion people worldwide that it advertised in terms of “no ads, no games, no gimmicks”.
In reality, Jan Koum didn’t square any circles or find the secret of making money without hassling people. Instead, he simply leveraged WhatsApp’s growth to get a better price and pass the problem onto somebody else. The idea of going after the corporate market is far from original: in practice, many irresponsible companies today are already using it for internal communication, despite poor security and encryption, effectively making it as secure as having a conversation at full volume in public.
At the same time, a lot of companies already use WhatsApp to talk to their customers. What it now intends to do is enter the corporate market, a niche market that is already crowded in the internal communications segment — from Microsoft’s Yammer, with the guarantee that comes from a company that already offers many of the elements that companies use in their information technology architecture, to other possibilities such as Slack, Cotap, Zula and many other providers. And at the B2C level, things look somehow tricky too.
The problem WhatsApp faces is that it has a disastrous security record, and what is more, it now belongs to Facebook, which for many years — less so nowadays — many companies blocked on the grounds of improving productivity; they also have their concerns about giving Facebook access to their information.Even WhatsApp’s critical mass and adoption take up, a key reason for using it, is of marginal value to companies, which don’t usually have any problem in getting staff to start using other communication tools, especially as they know how to do so thanks in large part to WhatsApp.
I could be wrong, but I would be very surprised if WhatsApp makes any real money in the corporate market. Using it for internal communication is not a good idea, while trying to communicate with customers that already use WhatsApp is at best going to be a freemium service that could provide some analytics and added value, but is unlikely to make much money for Facebook either.
The problem is that there is any number of businesses using WhatsApp already to talk to their customers. It could be used to replace 900 numbers, but the question here is whether a business model can be created that would persuade a large number of companies to pay to use it.
As far as I can see, this is an attempt to justify paying $23 billion for a company whose users were mostly already signed up to Facebook and that wasn’t going to make any money ever. I can understand that Facebook didn’t want anybody else to get its hands on WhatsApp, and that it was scared that its own users would switch to it, but was it really worth $23 billion?
The acquisition of Instagram for $1 billion (which ended up being a little more than $700 million after Facebook’s share price fell) was risky: it was a company without a business model, but Facebook was able to provide it with one. And that’s what happened: today, Instagram is one of the company’s most profitable divisions, and the purchase is seen as one of the best designed in a long time. WhatsApp is a very different case: two years after its acquisition, most people are still scratching their head. Aside from the growth, which was based on expected guidelines, there is little other evidence to suggest Facebook is ever going to get its money back. Perhaps it was simply the price that had to be paid to avoid other possible scenarios…
(En español, aquí)
