WhatsApp becomes free, will instead put focus on businesses

Steven Loeb · January 18, 2016 · Short URL: https://vator.tv/n/42bb

The app is rapidly approaching one billion active users, and should get there sometime this week

When Facebook bought WhatsApp for a whopping $19 billion a couple of years ago, the company had one revenue stream: after giving the app away for the first year, it then charged each user a dollar per year. It had hundreds of millions of users, and was growing fast, and the promise was that, eventually, it would come up with other ways to make money.

Now that time has finally arrived, as WhatsApp CEO Jan Koum announced the end of the annual subscription fee in a blog post on Monday, making the app completely free. The reason, he wrote, is that, "As we've grown, we've found that this approach hasn't worked well."

"Many WhatsApp users don't have a debit or credit card number and they worried they'd lose access to their friends and family after their first year," he said. "So over the next several weeks, we'll remove fees from the different versions of our app and WhatsApp will no longer charge you for our service."

Ok, fair enough. I can certainly see that being an issue, especially in poorer and more rural areas of the world. WhatsApp will have to make money somehow, though, with the most obvious answer to that being some form of advertising. Koum, however, has always been adamant that the company would not make money this way.

All the way back in 2012 he wrote blog post, railing against the use of ads online, saying, “When we sat down to start our own thing together three years ago we wanted to make something that wasn’t just another ad clearinghouse. We wanted to spend our time building a service people wanted to use because it worked and saved them money and made their lives better in a small way."

"We knew that we could charge people directly if we could do all those things. We knew we could do what most people aim to do every day: avoid ads."

It would make him a bit of a hypocrite if he changed his position on that now. So, instead, going forward, the company will be focusing on making money by integrating businesses onto the app, essentially replicating the model that Facebook is currently working on with Messenger.

This is how Koum describes how it will work:

"Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from," he said.

"That could mean communicating with your bank about whether a recent transaction was fraudulent, or with an airline about a delayed flight. We all get these messages elsewhere today – through text messages and phone calls – so we want to test new tools to make this easier to do on WhatsApp, while still giving you an experience without third-party ads and spam."

Messenger, you might remember, recently integrated with Uber, allowing users to hail a ride without having to leave the app.

There is also Businesses on Messenger, launched in March of last year, which enhances communications and interactions between people and businesses. That means that if a person buys something from a website, they can then get updates in Messenger, including order confirmations and shipping status updates. They will also be able to modify their order, track it or return it. The company's initial partners were Everlane and zulily, both in the retail vertical. It is also currently working with Tieks, Gilt, Fancy, pro.com, and Hyattand Rogers.

Koum also discussed this new revenue stream at the DLD Conference in Munich on Monday, where he noted that, at the time of the company's acquisition, Mark Zuckerberg told him that he would be given time to grow the app before needing to monetize. And grow the app he certainly has; it reached 900 millionactive users in September, and is now apparently just days away from reaching one billion.

Given those numbers, he said, it's time to start making money.

Not surprisingly, it also doesn't seem like WhatsApp is going to have any trouble finding businesses to work with. Not only has the company been approached by several potential partners already, a source told Fortune, but some, especially those in Hong Kong, have already been unofficially integrating the app already. 

With WhatsApp about to hit one billion users, there's a gigantic opportunity here. There was some question about whether or not Facebook overpaid for the app, and now we will finally see the company make good on its promise. 

(Image source: whatsapp.com)

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