Blog Media & Marketing

WhatsApp Drops Annual Fee As It Hits 990 Million Users – Next Stop: Monetization

Photo of Karol Severin
by Karol Severin

The CEO of WhatsApp, Jan Koum, announced in Munich that WhatsApp now has 990million users.

There have been many talks about Facebook overpaying for WhatsApp. However, it managed to double its user base since the acquisition and played a significant role in helping Facebook dominate the mobile messaging space. The standalone app has more users than the Messenger platform. All this scale was captured despite charging $1 annually for the service, after the first free year. Kaum also announced that WhatsApp is getting rid off the annual fee in order to boost user uptake even further. Indeed, in key emerging markets like India or Brazil $1 can represent a significant hurdle for users to join in. The willingness to sacrifice almost $1bn dollars annually (8% of Facebook’s 2014 revenue) to gain further scale suggests that Facebook and WhatsApp have teir eyes firmly set on the bigger strategic picture.

One of the great challenges for advertisers and businesses more broadly, is to identify places where addressable audiences congregate so as to offer services in a non-intrusive, helpful manner. Messaging is the most prominent place on mobile in this sense. WhatsApp and Messenger managed to capture a significant share of this space.[i] Facebook has already started making moves to include integration of third party services onto Messenger and Whatsapp is already being use by many businesses to communicate with its customers. It is safe to expect that Whatsapp will go further in the direction of improving this B2C experience to the point where they can start monetizing it. Note that although both services serve now a similar use case and therefore may intuitively be seen as competitors, they complement each other regarding their key geographies. Broadly speaking, Messenger dominates in developed markets (e.g US and UK). On the other hand Whatsapp often dominates mobile messaging in emerging markets, where the product was positioned as a price competitor to the omnipresent SMS, rather than the more ‘first-world problem’ social solution that is Messenger.

From A Hyped Up Social Medium To A Ruling Tech Giant

Facebook has done a brilliant job staying relevant beyond its initial hype as a social medium and it’s now ready for its next step. At first its use case was to stay in touch. That evolved to a social content portal keeping us up to date automatically via a news feed. Later, messaging added yet another way for communities to spend more time inside Facebook’s ecosystem. However, the vast majority of engagement on Facebook has been a question of entertainment and social connectivity. Both of these are lower on the priority list of consumers than ‘necessities’ or utilities. As much as consumers like to justify their time spent on Facebook et al, Facebook is yet to become the space where consumers can comfortably claim to go ‘get things done’. Integrating third party services onto messaging platforms unlocks that potential. Being able to pay your bills, book a table or a holiday through one of Facebook’s messaging platforms expands the giants’ use case from an entertainment destination to a utility platform. Which will mean even more frequent usage. Conquering this space is one major task that still separates Facebook from truly claiming the status of an omnipotent digital companion. It is still hard to predict exactly how big the uptake of running errands via messaging platforms will become. What’s clear is that the scale of Facebook’s messaging ecosystem provides a powerful launch platform for this purpose. And with other tech giants significantly lagging behind on the mobile messaging front, Facebook’s chances of dominating the lucrative utility space are currently second to none.

[i] For detailed analysis on mobile messaging, MIDiA Mobile Messaging Platforms report is available to all clients. If you are not a MIDiA client, you can purchase the standalone report here.

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