The messy Split Between Facebook and WhatsApp’s Founders
WhatsApp co-founders Brian Acton and Jan Koum gave up $900 million and $400 million, respectively, by leaving Facebook before they were eligible for stock awards.
On April 30th, Jan Koum, co-founder of WhatsApp, announced in his post that he was leaving Facebook.
The news received a quick response from Facebook CEO Mark Zuckerberg.
However, according to WSJ, Many of the disputes with Facebook involved how to manage data privacy while also making money from WhatsApp’s large user base, including through the targeted ads that WhatsApp’s founders had long opposed. In the past couple of years especially, Mr. Zuckerberg and Ms. Sandberg pushed the WhatsApp founders to be more flexible on those issues and move faster on other plans to generate revenue.
In 2016, WhatsApp waved off the $1 subscription fees. The strategy behind this move was to position the brand as a synonym for an instant messaging application. This required the company to capitalize on the network effect. With almost 450 million daily active users, the strategy has certainly paid off.
While the free WhatsApp service should continue to see an increase in the number of users, WhatsApp’s ultimate monetization strategy, once established, should allow Facebook to generate revenue from this large user base.Facebook’s plan to generate revenue form this large market share; Now, combined with Facebook’s unanimous control over WhatsApp, we can expect some changes in their business model in near future.
What could be their business model in near future ?
Transition towards a Freemium Business Model
The company has launched WhatsApp Business which lets users build their business profile and become a verified business on WhatsApp. The verified businesses can create their business profile along with certain important links to their website or Facebook page, set up auto responders, can even link their landline numbers with WhatsApp. The WhatsApp Business application is currently free to download and use for small businesses.The company has reportedly already been surveying users to understand to what extent and in what arenas would they like to send and receive communication to business, in order to rip out the scope for spam as far as possible. However, we can expect WhatsApp to introduce some in-app purchases and adopt a freemium business model in the future.
Revenue from P2P payment integration on their platform
WhatsApp’s peer to peer payment feature is now live in India, making it the first country to support in-app payment on the popular messaging platform which will further boost its position in the market and will make it a preferred application for monetary transactions. This will further benefit WhatsApp business in the company’s biggest market.
The sources for revenue could be credit card fees, merchant fees etc. Venmo has proven this business model. Don’t be surprised if WhatsApp follows the same route.
Integration with Facebook’s other platforms (eg. Facebook marketplace)
Although this is highly unlikely, the company could also look for new revenue sources by integrating WhatsApp with Facebook Marketplace. With WhatsApp’s mammoth user base and marketplace’s huge seller-buyer network with platform integration capabilities, company can generate revenue through WhatsApp’s integration with their other platforms.
How Much Revenue Can WhatsApp Generate ?
All of the above strategies are is in line with Facebook’s strategy to monetize a platform once it crosses the billion-user mark and use organic interactions between businesses and users as the first step toward monetization. According to Forbes, WhatsApp could make average revenue around $4 per user by 2020. This could yield revenues of around $5 billion for Facebook in 2020, contributing about 9–10% of the company’s total revenues, according to their estimates.
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