2 billion of low-value users; FB users are accounted at $150 a head; out of 2 billion users it's account for, only ~100 million would part with a $1 / month to use the application - less that $12 a year per paying user. WhatsApp doesn't have any other monetisation strategy, there are no ads, and the markets they are in are extremely sensitive to fees for payments, for example.
> It's just doing so in India.
Everybody is doing so in India thanks to UPI. Google Pay, virtually unseen outside Tap and Pay in other markets, has 35% percent of the market in India - Whatsapp has a high 0.27% percent of the market in Sept 2021, up from 0.01% previously. https://www.moneycontrol.com/news/business/upi-top-3-retain-...
India payments competition is ruthless thanks to low barriers of entry.
> It's not clear it's even possible to effectively monetize pure messaging platforms like WhatsApp
Well, WhatsApp is moving beyond "pure" messaging with payments and commerce (Eg: JioMart integration in India).
Another approach would be to compare with wechat with 1.2 billion active users generating an estimated 15+ Billion in revenue in 2021 (https://www.businessofapps.com/data/wechat-statistics/) without much North America / EU presence and being banned in India.
Interesting. WhatsApp currently has no business model. No ads. The app is free. This can be an interesting area to charge users some real money. In India, WhatsApp is already huge -- 400 million users -- so they have a reach that is unparalleled in the world's second largest internet market. And largest open market.
> Just before WhatsApp was bought by Facebook, they were asking for that $1 per year (I remember paying it) and they had 450 million users, in spite of plenty of chat alternatives being on the market ever since the 90s.
How many of those users were actually paying at the time? IIRC they allowed 1 year of free use (even more depending on your country). I don't know what the churn is going to be the moment a currently free customer becomes paying, but it is definitely non-zero. I really don't think that is evidence for a long term sustainable business model if others exist with zero total subscription fees.
> I’m not saying that the ads model doesn’t have its place, far from it, I’m saying that WhatsApp could have lived just fine without it.
The biggest reason for WhatsApp's success was the cost of SMS messaging most international markets. That's actually declined significantly since its introduction, so that's another drag on their pricing power.
Could they have lived? Maybe. But I doubt they'd have 1.5 billion users like they do now, and I don't think they long term trajectory for the business would look sustainable charging $1 a year.
Probably not representative but in my circle, 90% people did pay for whatsapp before FB bought it out. The rest either had lifetime subscription through iOS AppStore or changed their phone numbers every year just to use whatsapp.
Whatsapp is the only software I've seen Indians pay for without thinking twice. 60 rupees per year is very easy to shell out especially when it replaces SMS which would cost you many times more.
The problem in India is not that people won't pay for whatsapp, it's that majority of the people don't have a way to pay. Very small percentage of whatsapp users own credit/debit cards. If a service could integrate with telcos and let users pay through them, I'm sure a lot of Indian users would pay for a lot more services than they do right now.
Whatsapp already supports payments in India through UPI. Setting it up is quite trivial, and if people deem WhatsApp central to their social graph, they'll buy the app.
However India is an extremely price conscious country, and many people would jump ship if WhatApp switches to subscription only. I tend to think that people would tolerate WhatsApp ads if they get the app free.
It will be interesting to see how this will play out.
>>It doesn't cost them $100M a month to provide the service.
This isn't that much of a factor. FB paid $19bn for Whatsapp. A small profit on a $100m or $500m revenue base is never going to justify even a fraction of that acqisition price.
FB sort of set this standard themselves. They didn't pay attention to revenue early, as the movie said: A million dollars isn't cool. A billion users is cool. At IPO-time, those billion users still didn't ad up to revenue. This is much later than google, who had a mature business model much earlier.
Then, FB actually did find a formula to turn their 2 bn free users into a revneue stream. They proved it can be done.
Putting on the ruthless analyst hat... There are two reasons for the whatsapp bidding war: (1) keep it from the competition (2) potentially turn 2bn users into >$2bn revenue. FB already achieved no. 1. The ruthless business thing to do would be to force whatsapp to bet the house on achieving no. 2.
In 2015, when WhatsApp had ~1B active users, Facebook said that the overall revenue from it was insignificant enough they they were just making it free. I'm pretty sure it wasn't charging the vast majority of users (which is how it got popular in developing countries in the first place).
To be fair, WhatsApp has an incredible number of very active users. It's not like the companies in 1998/99 which had no revenue, no users, but spent millions on Super Bowl ads.
That said, this is a staggering amount to pay. I'm not familiar with Facebook's financials, but I'm surprised they could even afford this. I'd chalk this up to Zuckerberg's paranoia about no longer being #1 and less to a bubble.
Talk about living in a bubble. +everything drdaeman@ said above.
There are more people using WhatsApp in India (thanks to popularity of image/video/voice-messages) than who can actually read or have usable Bank accounts. If you think they can pay "$1" for something they can get for free (and have been using for free in past), then you are completely out of touch of reality. Apart from the amount (which is not trivial btw), there is no concept of digital payment for masses.
Also I know it's hard for HN crowd to understand, but the concept of paying to protect "Privacy" is completely foreign for majority of the users in the world. I can guarantee you majority of the users (at least in India) will happily let you track them, show targeted ads at them, give you all the personal details you need, heck even give your their Genome for for free without even blinking an eyelid. And I am not saying this is just because of ignorance on their part, but rather "Who cares if they track me" - I get free services in return.
And this is actually not a bad setup really (again I know HN crowd will get their pitchforks out at it): Show Ads to provide actual free services (like WhatsApp, Google search, Maps, etc) to the masses. It's much better IMO then charging for these services and never have the masses be able to use them (like "GPS" would be a premium service for rich people).
Disclaimer: All opinions expressed are mine and only mine and have no connection to my employer (Google).
I can't say about WhatsApp in other countries but their usage is going to take a hit in India once they start charging(they plan to charge $0.99 per year, that is ~INR 60), people will flock.
Reasons:
1. People in India are too used to "free" software. Only legal software most purchase here is Windows that comes bundled with laptops/desktops.
2. Low credit card penetration. Most of the teens don't have credit cards. Thanks to government rules, we can't use debit cards to pay on App Stores as well.
So people either won't pay or can't pay. Many are already starting to use other apps and there is no shortage of free apps due to exploding messaging space.
I think the Whatsapp price was a huge blunder by Zuck. Whatsapp has lots of users - most of whom are in countries viewed as almost worthless by advertisers. Their US footprint is insignificant, and shows no signs of growing here or in many other valuable countries. Their current revenue - $10.2M/year with 400M users - shows their users' propensity to pay.
Even if you valued Whatsapp by Facebook's P/E ratio of 87.74, it would have to make ~$215M/year in net profit to justify the (original) $19 billion price tag. That's around $0.50/user/year in net profits. I just don't see it ever happening.
2 billion of low-value users; FB users are accounted at $150 a head; out of 2 billion users it's account for, only ~100 million would part with a $1 / month to use the application - less that $12 a year per paying user. WhatsApp doesn't have any other monetisation strategy, there are no ads, and the markets they are in are extremely sensitive to fees for payments, for example.
> It's just doing so in India.
Everybody is doing so in India thanks to UPI. Google Pay, virtually unseen outside Tap and Pay in other markets, has 35% percent of the market in India - Whatsapp has a high 0.27% percent of the market in Sept 2021, up from 0.01% previously. https://www.moneycontrol.com/news/business/upi-top-3-retain-...
India payments competition is ruthless thanks to low barriers of entry.
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