When Facebook decided to acquire WhatsApp ten years ago, there was great concern. But the chat service remained ad-free and user-friendly. However, the opportunity for an alternative online business model was missed.
Behind the WhatsApp logo, which can be found on more than two billion smartphones, lies one of the technology industry’s most exciting what-if questions. What if the founders and backers of the chat service had resisted the temptation of a $19 billion purchase offer from Facebook ten years ago?
Would the service have lost out in the competition with the technology giants? Or would the business model with a subscription price of one dollar per year have proven itself as an alternative to free services where you are inundated with personalized advertising?
Immediately after the deal was announced on February 19, 2014, concerns arose among users that the service could fundamentally change under Facebook’s leadership. After all, shouldn’t the money spent be recouped in some way? And by the time the acquisition closed in October 2014, the purchase price had risen to nearly $22 billion – much of it paid for in Facebook shares, which had risen in price.
Ten years later, WhatsApp is still unmistakably WhatsApp. There is no advertising, the app is linked to the phone number instead of a profile. And all messages are protected with end-to-end encryption, which ensures they are only visible in plain text on participating users’ devices, but not to the service.
By mid-2023, WhatsApp had 2.79 billion users. When Facebook started buying WhatsApp, there were only about 450 million users. And there were actually more traditional text messages sent than instant messages. Nowadays it is unthinkable to pay money per individual message. At the time, mobile phone providers were just coming to terms with the fact that they would lose this once lucrative source of money.
WhatsApp turned out to be the right text messaging alternative at the right time. The ease of use didn’t deter even those new to smartphones. And the service bridged the gap between iPhones and phones with Google’s Android system. Apple’s chat service iMessage is only available on the company’s devices – and the need for a cross-platform solution was there.
WhatsApp was only launched in 2009. The two co-founders Jan Koum and Brian Acton had worked at the then internet heavyweight Yahoo and then wanted to try out their own start-up.
Facebook became aware of the service through its purchased VPN app Onavo, which the company also used to map trends in users’ habits. WhatsApp’s perceived explosive growth may have explained the sensational purchase price. In a competition lawsuit, the US government accuses Facebook of simply buying a competitor out of the market before it could pose a threat to the company. She came up with the idea of splitting off the service. The process for this is still ongoing.
The Facebook group Meta thinks it has now found a way to ultimately make money with WhatsApp. Facebook quickly dropped the $1 subscription fee after the acquisition. Nothing will change for users, but companies will pay money to communicate with their customers via WhatsApp.
In the last quarter, Meta’s app revenue outside the advertising industry increased by 82 percent, mainly thanks to WhatsApp’s business platform. However, at $334 million, they accounted for just 0.8 percent of the group’s total revenue.
Founders Koum and Acton only stayed with WhatsApp for a few years after the acquisition. Koum announced that he would now take time for business outside the technology industry – “for example, collecting rare air-cooled Porsche cars” – and largely disappeared from the scene. In the meantime, Acton invested in the chat app Signal, whose encryption technology WhatsApp now also uses.
Facebook rejected him. Then they paid him $19 billion. Here is Brian Acton’s incredible story 🧵 pic.twitter.com/RYSolhJrJz
— JasonRaznick (@JasonRaznick) October 20, 2023
Signal also recently provided evidence that WhatsApp’s original business model could have worked. The chat service, which is funded by donations like Acton’s, estimated it would need about $50 million to develop and operate next year. With just one dollar per user, WhatsApp would have made many times that amount.
(sda/dpa)
Source: Watson
I’m Ella Sammie, author specializing in the Technology sector. I have been writing for 24 Instatnt News since 2020, and am passionate about staying up to date with the latest developments in this ever-changing industry.
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