Fri, 02/21/2014 – 09:01 by WhatsApp may cross the threshold of a billion users later this year. The first year is free, thereafter it costs $0.99 per year per user.
If we assume that every one of those hypothetical billion users starts paying $1 per year. The company would bring in an additional billion dollars in revenue to Facebook, which just purchased (subject to regulatory approvals) the company for $19 billion in cash and stock.
While many are arguing that WhatsApp was not expensive by some standards (cost per user), Facebook will over time be compelled to justify the acquisition by making money off of it. And that doesn’t just mean fee-based revenue.
Facebook CEO Mark Zuckerberg and WhatsApp CEO Jan Koum have very different views about privacy and advertising. The Wall Street Journal sums those up nicely in an
article today:
The men are divided by more than differing approaches to making money. A legacy of his childhood in Ukraine is Mr. Koum’s emphasis on privacy: WhatsApp doesn’t collect any personal information other than a mobile-phone number and address book, and it wipes out messages shortly after they are sent . . . Mr. Zuckerberg, by contrast, has riled users by changing Facebook’s privacy settings in ways that some thought exposed more of their personal information more widely.
Koum doesn’t trust or like advertising; Facebook lives and dies now by the growth of its ad revenue. Something’s got to give then.
Either Koum and WhatsApp will bend on privacy, data mining and ads or there will need to be some accommodation to Koum’s positions. That compromise could come in the form of opt-in SMS-style marketing.
Companies such as Placecast and other SMS-based mobile marketing firms use double and triple-opt-in systems to ensure that users consent to receive marketing messages from brands and retailers. This kind of permission-based (including loyalty) marketing could be a way around the conundrum for Facebook and WhatsApp.
The market will expect Facebook to monetize WhatsApp usage at some point in the future. Subscription revenue will probably not satisfy investors because of the perceived, larger marketing opportunity. Less intrusive, permission-based SMS-style opt-in marketing could be a way forward for the two companies.
