Spread the Message
An effort to understand VC’s love for messaging apps
Investors have a sudden crush for new age messaging apps and it is shared by some silicon valley top executives, equally passionately. I am trying to understand why.
The biggest player in that space has to be “WhatsApp Inc.”. Based in Santa Clara, US, theirs is a small team of 11-50 people, most of them being engineers. This small team comprises of people from companies like “Yahoo Inc.”, “Google” and “Microsoft”. Their only product is an cross platform instant messaging service available on almost all smartphone platforms. It also holds the current world record of handling the most(27 billion) messages per day. Their $100M per year revenue comes from their 250 million subscribers(which is more than Twitter by the way!). They used to have a dual revenue model until their latest version, since then all their apps are free on all platforms and they have a very strict “no-no” for ads, they only charge for the subscription, which is $0.99 per year. Their investors include the likes of “Sequoia Capital”, which has invested $8M in the first round and has it’s “Jim Goetz” sitting on WhatApp board. No wonder, WhatsApp has been a hot acquisition for quite a long time. Rumours of WhatsApp getting offers of as high as $1B from Google to Facebook are not new and have always been declined/discarded by the company.
The next notable player is, “MessageMe”. Their current user base is over 5 million, but it took them only 75 days to reach there. They have recently managed a $10M round led by Greylock Partners in May this year which adds to their $1.9M raised in seed funding 2 months before that. They have also managed to bring the former Facebook executive, “Ali Rosenthal” onboard as their COO. In addition to the usual features their app has two inactive icons for stickers and money.
There are also some regional players that are aiming for a better global exposure. “Line” for example, is from Japan and claims to have 200M active users, out of which they claim 40% are active daily. It sells stickers, emoticons and similar add-ons to it’s users. “WeChat” is the most used chat app in China, they have featured two of the hottest new movies stars for their TV ad here in India for their debut here.
What I am trying to understand here is investor’s love for these newbies. How sustainable do you think their revenue models are without ads? How effective their lock-in would be? as in terms of dependence everybody is have 2-3 messaging apps on their smartphones these days. “Facebook” & “Google Hangouts” seem a must for so many. Do let me know your thoughts . . .
