WhatsApp, what’s that?
WhatsApp is an instant messaging service for smartphones created in 2009 by two former Yahoo engineers: Jan Koum and Brian Acton. The founders’ original idea was to allow smartphone users to send messages easily without paying any fee to phone carriers. It allows you to send messages, pictures or videos for free anywhere in the world without interference from third parties. It is free the first year, then you have to pay 99 cents per year to keep using it.
The other core value of the project was to guarantee privacy to its users. For Koum, being born and raised in a communist country like Ukraine where phone lines were often bugged, privacy was essential. That’s why the app does not require your name, age, gender or location to register and is said to limit data collection from its users. Your messages are deleted off their servers once they’re delivered.
These days companies know literally everything about you, your friends, your interests, and they use it all to sell ads.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.
Why is it so successful?
You may think that being able to send instant messages to your friends for free is not revolutionary, so what’s the big deal? Well, WhatsApp does benefit from some cool features and a nice integration that make it pleasant to use.
First of all, registering is extremely fast and easy, only your mobile phone number is required. Then, WhatsApp automatically synchronises your contacts from your device and adds them to your contact list, which is instantaneous and very convenient. You can also share contact information, make group chats, record audio messages, share your location, … and the app always runs in background and pops up like any other normal messaging system when you receive a message. It is fast, reliable (both on android and apple) and all that is gathered in an intuitive and nice interface that makes SMS, or any other IM experience overall inferior.
We are providing a richness of experience and an intimacy of communication that e-mail and phone calls simply can’t compare with.
Finally, the fact that everybody has the app on their phone helps adopting it. The app benefits from a large pool of users, more than 465 million, that surpasses the 300 million of Skype, 270 million of WeChat and 240 million of Twitter.
Indeed, it has grown faster than any other tech giants like Facebook, Gmail or Twitter. Daily, it is 19 billion messages that are sent and 34 billion received in the world. Nine months ago the company “only” had 200 million users and is now growing at a rate of 1 million new users everyday. In comparison, Facebook had fewer than 150 million users after its fourth year.
WhatsApp’s users growth has been unprecedented in terms of speed but also engagement: 72% of WhatsApp users use it everyday while the industry standard ranges between 10% and 20% with 61% for Facebook.
Who uses it?
WhatsApp isn’t widely used in the US but overseas it is a huge success. In India or Brazil for instance it is the most popular messaging app. A reason of this difference may be that in the US people enjoy unlimited text messaging mobile plans while in Europe most operators charge per message. It is a cheaper replacement for SMS. Moreover, the Europeans tend to communicate more with people in foreign countries than the Americans.
Why did Facebook spend so much to buy it?
Facebook paid $12 billion in Facebook shares, $4 billion in cash and $3 billion for employee retention for a total of $19 billion, about 8% of Facebook’s total worth. That is to say $345 million per employee (55 people) and $40 per users so why pay this cost?
First, WhatsApp could have represented a threat to Facebook. Facebook tried to push its own messenger services but did not meet much success so far. With 465 million users, WhatsApp was too far ahead for Facebook to catch up.
Second, it matches Facebook strategy to focus on mobile. Indeed, more than two third of its users log on the site from a mobile device and mobile ads represents now 41% of the company’s total ad revenue. It bought Instagram last year in this perspective.
Finally, it is also a way to reach into Europe and emerging markets since WhatsApp dominates outside of the US, especially in Europe, India or Brazil. What’s more, it is impossible for Facebook to acquire its Asian competitors like WeChat, owned by the Chinese Internet giant Tencent who count up to 272 million active users (doubled in one year) and who is now focusing outside of Asia.
What will WhatsApp become in the future?
With Facebook’s motto to “make the world more open and transparent” one could be worried about privacy issues. Everybody knows that Facebook collects personal data from its users and sells it for advertising.
However, Jan Koum, who is now on board insisted that its company would remain autonomous and independent and that therefore its users could still count on absolutely no ads interrupting their communication.
There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product.
In the future, WhatsApp will certainly keep growing. The servers crashing that happened after the news of the deal and made it inaccessible for 3h30 attests of its success since during this time it was getting 100 signups each second.