
Facebook’s New Message to WhatsApp: Make Money - ericzawo
https://www.wsj.com/articles/facebooks-new-message-to-whatsapp-make-money-1533139325
======
russellbeattie
Whatsapp had a great business model: $1 a year. With their current 1.5 billion
users, that's nothing to sneeze at. It doesn't cost them $100M a month to
provide the service.

I wish more companies were like Craigslist - happy to make an great profit and
a lasting business by providing basic information services for a reasonable
price. Instead, a bunch of MBAs want to rule the world by focusing on growth
at all costs, so they can then turn around and squeeze their locked in users
for every dime possible.

~~~
Smirnoff
Ok, I agree that some MBAs can be full of it but can we already stop this MBA
hate on HN? I feel like lots of people here think that if you build something
then customers will surely come. I've got a huge surprise for you. You will
have to sell your product and some of the MBA's are really great at that. In
B2B a single sale can make or break your company when you're low on cash.

You do your job and let them do theirs. You code, talk to users, ship, and
iterate. They handle sales, operations, marketing, and maybe fundraising.
These other things can be done by a technical founder but they are not fun.
There is a reason why some companies hire COOs so that CEOs can focus on their
job.

Finally, it's not MBAs who decided to focus on growth at all costs. It's the
nature of the game. Either you get to the top or your competitors will do
that. So don't hate the player, hate the game.

~~~
beefield
> Finally, it's not MBAs who decided to focus on growth at all costs. It's the
> nature of the game. Either you get to the top or your competitors will do
> that. So don't hate the player, hate the game.

Well, I do think it is fair to make a strong connection between the whole
concept of maximizing shareholder value being the ultimate corporate goal and
MBAs and their education. If the ultimate corporate goal would be maximizing
customer value instead, the whole social media landscape would look very
different.

And the funniest thing is that nobody has ever been able to explain me why
maximizing long term shareholder value would be a better goal than e.g.
maximizing long term customer value. I mean, in order to maximize long term
shareholder value, you need to pay your taxes and competitive prices to other
factors of production like labour and debt holders and your supply chain.
There is no rocket science there. And if your goal was to maximize customer
value instead, _of course_ you would need to pay competitive rates to equity
holders, otherwise you could not run the company and maximize the customer
value.

The corporation is an independent legal entity. The whole idea that the
stakeholders who get their moneys last in case of bankruptcy and risk only the
money they have invested (others are risking their careers, homes, businesses
etc) are designated as "owners" of this entity is _really_ weird once you
start thinking about it.

~~~
FabHK
Very good observations. And indeed, the whole notion that maximising
shareholder value is _the_ goal to pursue stems, I think, from a naive
"economism", as James Kwak called it in his excellent book _Economism: Bad
Economics and the Rise of Inequality_ [1], namely the following train of
thought:

The whole point of society is to maximise utility. We can't do interpersonal
utility comparison, so we're satisfied with a Pareto optimum (where you can't
improve anyone's situation without making someone else worse off). By the two
main theorems of welfare economics, Pareto optima are basically equivalent
(under the "usual" assumptions) to market equilibria. Thus, free market.

Next, there's the agent/principal problem: the principals
(owners=shareholders) of a company delegate the actual running of it to agents
(managers), and now the problem of value alignment arises - the managers could
be tempted to maximise their own utility (empire building etc., or even
beneficial things such as employee health insurance) instead of that of the
owners. And the theory suggests that the solution is maximising shareholder
value, because then the owners can themselves decide how to allocate the
proceeds (eg into voluntarily providing employee health insurance) as to
maximise utility.

[As an aside, btw, the theoretical case for free trade rests on an Economics
101 argument (comparative advantage), but is predicated on redistribution
(free trade creates efficiency gains such that even after compensating losers
you still retain a surplus, therefore it's better). However, the funny thing
is that the (eg libertarian) figures promoting free trade frequently
conveniently forget about that part of the argument.]

And of course the whole pareto optimum/market equilibrium/maximising
shareholder value argument is based on assumptions that just don't hold; the
world is more complicated than Econ 101, and very often more careful empirical
examinations of the evidence support much more progressive/liberal policies
than Economism suggests. (That's also the gist of Kwak's book, IIRC.)

TLDR: Growth at all costs is not necessarily the nature of the game, it's
contingently so because of flawed policies and flawed economics: the oh-so-
rational, yet so limited Econ 101 view that MBA students are typically
subjected to.

[1] [https://economism.net/](https://economism.net/)

------
danirod
Remember when WhatsApp required a subscription? One of the first changes made
by Facebook after purchasing WhatsApp was to make it available for free. And
now they're complaining they can't milk it enough? Oh dear.

I know that a percentage of WhatsApp users would stop using the app if they
started requiring a payment again –because apparently paying $1 per year for
using an application on your $999 phone is outrageous, but I wonder why can't
they just make it an option again as an alternative to ads.

~~~
anuragbiyani
You are completely mistaken if you think adding a subscription-only would not
reduce usage of WhatsApp by 10x at least. I am an Indian (WhatsApp's biggest
market by far), and know for a fact that hardly 1% of people using it right
now in India would be able/willing to set up a payment system AND willing to
pay $1 for it (which is not as inexpensive as you think) when there are so
many free alternatives. And then it immediately loses its value as a messaging
platform (since if my relatives/friends are off it due to forced subscription,
what will I do on WhatsApp even though I am ok paying $1). #networkEffect

So adding forced subscription is a definite death sentence for WhatsApp. Also
remember that _even if_ everyone of the 1B people did pay $1 for the service,
it will still be impossible for FB to recoup $19B it purchased WhatsApp for.

On the other hand, I would love a "Ad-free" mode for people who are willing to
pay (like YT Premium), and ads to support other 99.xx%.

~~~
mrweasel
If you can't charge people even $1 for your product, then I would argue that
you might as well close up now. As others pointed out, ads won't work either,
because if you can't afford to pay $1 for WhatsApp, then I'm not going to be
able to profit from showing you ads.

Ads aren't magical things you can slap on a product to make it profitable. For
ads to work you need an audience that technically could pay for you product,
but who opts not to. You need to understand that Google isn't a create example
of ads working, they are the exception. Facebook sort of works, but the US
(and to a minor extend the EU) audience subsidies the rest of the user base.

Your right in that the $1, even at $1 per year, Facebook wouldn't be able to
recoup the purchase price of WhatsApp. They won't be able to anyway, WhatsApp
was never worth $19B. Facebook vastly overpay for the company. The WhatsApp
purchase should be seen solely as a way of removing a company that "stole"
screen time from Facebook, and now they're looking for an excuse to shut it
down and roll the users into Facebook Messenger.

~~~
Broken_Hippo
"if you can't charge people even $1 for your product...."

Only folks aren't always just paying $1. He's describing folks needing to set
up a freaking payment system for a small amount of money - and that some folks
aren't going to be able to do _that_ and others aren't going to be willing.
That's even before you get into the actual payment of $1. And this is before
even considering there are other free apps that will work. There is a limit to
the inconvenience folks will go through for your product if there are simpler
alternatives, and being blind to this sort of thing could kill your company.

It also doesn't mean that folks cannot profit from ads. It isn't like all ads
require you to pay through the internet - On my phone, I've gotten ads from a
local coffee shop chain. I liken this sort of ad a cable tv ad. It might not
get folks clicking on a website, but it might get folks in your store.

~~~
SmellyGeekBoy
I don't understand all this talk of "setting up a freaking payment system"
like it's some huge technical hurdle? Do the vast majority of people not get
WhatsApp through the Play Store / App Store? Isn't adding a debit / credit
card or purchasing a topup card for these trivial?

All this is besides the fact that we're talking about making the subscription
model an _option_ in addition to the ad-supported model, not forcing a
subscription on everyone. I don't think a single person in this thread has
suggested that apart from the people using is as a straw man.

~~~
thirdsun
You have to know WhatsApp's user base to understand this. Here in germany it's
the de-facto standard communication platform. Everyone and their mother uses
WhatsApp - and I mean that literally: Lots of old, non-tech-savvy folks use
the service - the kind that even see creating an account as a barrier big
enough to not use the service. I still think using the phone number as account
was a genius move that enabled wide-spread adoption. Anyway, my mother and her
peers don't have a Paypal account, no credit card (this is germany after all,
credit cards can't be expected), certainly don't have a payment method
attached to their Apple ID or Google Account (You'd be surprised how many
people only use free apps). Yet all of them use Whatsapp happily and quite
frictionlessly.

These folks are very wary of subscriptions, regarding them as potential scams
or traps and while I'm sure Whatsapp would be successful even with a recurring
price tag, I'm confident the service would be nowhere near as ubiquitous as it
currently is.

~~~
chosenbreed
Okay. But not so long ago people had to pay for WhatsApp, no? Has the user
base grown tremendously since it became free (i.e. because it became free)?
One of the points made earlier is that before being bought by Facebook
WhatsApp was a profitable operation. If that was the case then there is
clearly an argument for having a relatively low cost subscription based
offering...

~~~
thirdsun
I'm not sure if they actually ever enforced their payment/subscription. I
certainly haven't been charged, but I was a user before that started if I
remember correctly.

------
walterbell
From [https://mobile.nytimes.com/2018/04/30/technology/whatsapp-
fa...](https://mobile.nytimes.com/2018/04/30/technology/whatsapp-facebook-jan-
koum.html)

 _" Mr. Koum had grown increasingly concerned about Facebook’s position on
user data in recent years. Mr. Koum was perturbed by the amount of information
that Facebook collected on people and had wanted stronger protections for that
data ... he felt the company’s board simply paid lip service to privacy and
security concerns he raised ... Mr. Koum was tired from fighting back against
pressure from the board throughout 2017 to allow advertisements on WhatsApp
... There had been a certain level of pride within WhatsApp’s team over the
dedication to privacy and the departure of their co-founder had left many
wondering whether Facebook would now open WhatsApp to tracking user data and,
eventually, to ads on its service."_

[https://www.google.com/amp/s/www.cnet.com/google-
amp/news/wh...](https://www.google.com/amp/s/www.cnet.com/google-
amp/news/whatsapp-founders-may-have-left-1-3-billion-behind-in-their-facebook-
breakup/)

 _" WhatsApp founders Jan Koum and Brian Acton reportedly left $1.3 billion
behind by leaving Facebook ... The major divide was over monetizing the
messaging app, which has 1.5 billion users. Koum and Acton had been resistant
to adopting Facebook's widely lucrative targeted advertising model."_

------
dlojudice
Is monetizing through ads the only way to go? Is FB org trapped on its modus
operandis (innovator's dilemma)?

What about payments (charging a small fee for transactions) on their platform?
The number of people already making business transactions on WhatsApp platform
is huge, specially in Brazil [1]. A big bank in Brazil has already tried to
grab this market by creating a keyboard with wire transfer integration [2].

This model is very similar to what WeChat has done in China.

[1] [https://www.zdnet.com/article/whatsapp-is-the-main-
digital-c...](https://www.zdnet.com/article/whatsapp-is-the-main-digital-
channel-for-brazilian-smes/) [2] [https://medium.com/@leandroscosta/bank-
ita%C3%BA-launch-a-ke...](https://medium.com/@leandroscosta/bank-ita%C3%BA-
launch-a-keyboard-to-keep-you-in-the-conversation-while-you-transfer-your-
money-34b6828d8edb)

~~~
xkjkls
Square, a company with many years headstart, trades at a high multiple, and
has many more integration points into commerce than WhatsApp does currently,
trades at a market cap of $27 billion.

Given that Facebook bought WhatsApp for $19 billion, trying a low probability
strategy of trying to compete for market share where the _best case_ scenario
is $27 billion in value seems foolish.

~~~
sonnyblarney
Square and Whatsapp are basically not comparable business entities.

~~~
xkjkls
If WhatsApp decided to move to payments, it is the closest analog.

~~~
sonnyblarney
No, square is fundamentally geared towards long-tail consumer retail, not
peer-to-peer payments, and it's very credit card oriented. They still would
not even be comparable.

~~~
xkjkls
What is the Cash app then?

~~~
cheeze
An okay alternative to Venmo.

The UI is definitely worse (IMO) and they've done a piss poor job at tying
users to identities more than using phone numbers. Nobody I know uses Cash App
except in exceptional cases. I have to double and triple check usernames to
make sure I'm not sending money to the wrong person.

The Cash app is a pretty small percentage of Square's revenue. Square isn't
much more than a credit card processor for small businesses IMO.

------
mnl
They had a business model: you provide a service to your customers and your
customers pay for it. As the service is awesome, customers stay. That's why
for instance in Spain, it has been the de facto messaging standard for 7-8
years. People paid for it if they had to, even for the 3-year pack. They use
WhatsApp for everything, it literally has replaced calls. If there are ads now
this might change, as that will alienate everybody. They might consider
Telegram (that'd be my bet). WhatsApp is considered standard functionality of
your phone here, you'd change your mobile provider if they start playing ads
in the middle of a call.

------
edgarvaldes
"Messaging service WhatsApp, which has a user base of roughly 1.5 billion, is
set to start showing ads in its Status feature next year"

Well, monetize through ads is something expected in any free platform that
does not belong to a non-profit organization. It's just a matter of time and
implementation. Here in Mexico WhatsApp is huge, even as a default B2C channel
for a lot of small businesses.

~~~
saagarjha
> Well, monetize through ads is something expected in any free platform that
> does not belong to a non-profit organization.

You could also, you know, charge money for the service.

------
salex89
There is nothing I would like more than Facebook to sell WhatsApp, so I'm at
least a bit more out of their claws or, alternately, for WhatsApp to be ruined
and all my friends go to some other messaging app. I've been a long user of WA
and really love it, but I'm not a fan of FB, although I do have an account,
but rarely use it for messaging.

~~~
hw
I can't agree more here. So far Whatsapp and Instagram hasn't been interfered
with too much by Facebook, aside from FB completely turning off Instagram API
and forcing everyone to upgrade to the IG Graph API way ahead of the
deprecation schedule.

API support for Instagram DMs is also something that's been long requested
for, but ever since FB bought Instagram, there hasn't been any work on the API
side. Sometimes I wonder if Instagram would have been better off as its own
platform free from the crutches of Facebook.

While I'm hoping that it'll stay that way, it's only a matter of time before
core Facebook starts to go the way of Myspace and they realize that
IG/Whatsapp is the future.

------
rbreve
They should try to apply the fortnite strategy, and charge for cosmetic
features such as premium emoticons, and profile photos

~~~
xkjkls
Engagement is not nearly the same. There are 1.5 billion WhatsApp users, but
how many would actually convert. I'd find it hard to see numbers higher than
the low single digits.

~~~
white-flame
Low single digit percent of 1.5 billion is still tens of millions. Certainly
you can make money with that size of a willingly paying customer base.

~~~
xkjkls
Ok, but if you’re kicking off those that are unwilling to pay, you’re
automatically decreasing the value of your app every time you try to charge
people. You can make money — for a time. If the purpose people joined in the
first place “I can connect with all the people I know” changes, then you start
seeing the growth move in a very negative direction

~~~
reitanqild
Why would you kick off those unwilling to pay? GP mentions charging for
cosmetic, not for the core product.

------
kough
As long as they don't start showing ads in my contact / messages list, that's
fine. As soon as that starts to happen I'm gone -- that's why I left FB
Messenger. Or at least give me some way to pay to turn that off.

~~~
bikamonki
That is exactly what they will do. The status tab will probable show ads
first, then the chats tab. Also, expect bulk messaging from business.

------
ilovecaching
TBH I prefer ads. As a small business owner, online ads have allowed me to
grow my extremely niche business without spending a large bundle of funding,
and I'm sure it's helped countless more small businesses compete against the
big box stores that can afford to do their own advertising. From a user
perspective, the product can be given out for free, which for social media is
a must, unless we want to start seeing classest messaging platforms excluding
people in countries who can't even afford 1 dollar or make digital payments.
If I was going to let ads bother me I'd be much more upset about someone
owning my search engine, phone, email, personal documents, cloud storage,
etc... who could cross references those sources to build an accurate picture
of my identity, rather than someone just owning my social media accounts where
I'm just about as fake as necessary to make my grandma think I'm still going
to church.

------
augbog
I remember interviewing WhatsApp once. First thing I asked was how much does
Facebook determine what comes down in terms of priority. The reply was "There
might be some things but we are our own entity. It really hasn't affected us
at all!"

Few weeks later it was announced WhatsApp CEO quits due to privacy
disagreements. lol

------
voltagex_
Shit, I just convinced my parents to use WhatsApp instead of SMS. Time to
start looking for an alternative. What's Telegram's business model? (yes, a
good UI is a requirement and no, Signal isn't there yet).

~~~
smoovb
Telegram just raising $1.7B in a crypto sale, which means it is the largest
chat app not owned by a major corp or government. Plus familiar interface to
Whatsapp, they won't even know you switched them.

~~~
MrBuddyCasino
If you are ok with your traffic routed being to russia (and recently, Iran),
not having default encryption on 1on1 chats and no encryption whatsoever on
group chats - sure, choose Telegram.

Not even counting the ICO, which is suspect in itself.

~~~
lloeki
> If you are ok with your traffic routed being to russia (and recently, Iran)

Where does that come from? Because from what I gather it's precisely the
opposite: Telegram users in Russia and Iran are leveraging proxies (sometimes
run by volunteers) to get around their nations filtering.

When you're using someone else's platform it all comes down to trust, and I'd
rather trust an expat Russian that left his home country on grounds of being
coerced into handing over user private information to his then nation's
surveillance strike force and refused to bow down on that same nation's
attempt to subvert his new platform then blocking half of the Internet's
servers, than an app claiming to be end-to-end encrypted under the helm of a
company that has time and time again been caught red-handed invading
everyone's privacy and lying barefaced about it and whose monetisation and
privacy strategy is denounced by the very founders of said chat app to the
point of dropping everything on the floor and leaving said company.

~~~
MrBuddyCasino
well: [https://bgpstream.com/event/144057](https://bgpstream.com/event/144057)

------
eoincathal
I am more than happy to pay for a subscription to Whatsapp. I have a scattered
family and it's a great way for us to stay in touch. As one of the more
technically-minded family members, switching to a different service does not
bother me but we've got 3 generations on our Whatsapp family groups and its
ease of use and familiarity gives it inertia.

Not bothered by the idea of a relatively affluent westerner (me) paying more
than those in less well off parts - already do for a lot of goods and
services.

Facebook's data hoover and business model aside, are subscriptions, in
themselves, unworkable for Whatsapp?

~~~
xkjkls
Pay what though? $1 a year? $10 a year? $100?

They have to find a way to justify the $19 billion purchase price. Almost all
charging schemes are only going to get certain fraction of people to convert,
and they need to be finding ways to reach similar $20 per user revenue numbers
like the Facebook main app has in the US.

------
noncoml
Almost everybody I know has at least 2 messaging apps installed on their
phone.

What's to stop people start migrating to Signal/Telegram/Viber/Keybase/etc..
once WhatsApp starts displaying ads?

~~~
enitihas
I think you are an outlier in that regard. Almost nobody I know is using any
other messaging app instead of WhatsApp, and I just graduated out of
University so my social circle consists of a lot of fresh engineering grads.
It is hard for me to convince even my batchmates to install signal. I think
people don't want to install anything else as none of their contacts are on
any other platform.

~~~
pmlnr
Everybody has a certain messaging app on their phone: it's called SMS. Add one
more, that's already two.

~~~
SketchySeaBeast
Are there good apps that support "chat room" style activities? Google Messages
falls over when you try to send out mass messages. I'd like to see a sms app
that allows one to have mass messaging - it's the only reason I keep WhatsApp
around - coordinating with a group of friends.

~~~
lloeki
Do Telegram groups, supergroups, or channels fit the bill?

[https://telegram.org/faq#q-what-39s-the-difference-
between-g...](https://telegram.org/faq#q-what-39s-the-difference-between-
groups-supergroups-and-channel)

------
neonate
[http://archive.is/nRt3x](http://archive.is/nRt3x)

~~~
ernsheong
[https://app.pagedash.com/p/ba7ed211-4563-4a5b-b410-b084f7e5a...](https://app.pagedash.com/p/ba7ed211-4563-4a5b-b410-b084f7e5a9df/7lNftPCeupNLZamzYgzb)

------
Entangled
Make it a money remmitance platform and allow one billion people to send a
trillion dollars a year charging just one percent in fees (ten billions in
revenue) while providing merchants with extra apps and features for a premium.

A couple of days ago I was ordering a pizza by phone and they told me they had
a whatsapp channel to take orders so I thought paying using whatsapp would be
perfect. No need for annoying ads or invasive data collection.

~~~
brisance

      > No need for annoying ads or invasive data collection.
    

But they've already built infrastructure to do all this surveillance, the
incremental cost is minimal. It's just too tempting to pass up on the low-
hanging fruit.

------
blocked_again
Only if big companies stop trying to make the world a better place and leave
companies like WhatsApp alone. WhatsApp was a small company making good enough
money by respecting it's users. Then Facebook had to come and destroy
everything isn't?

------
dep_b
I don't remember any new feature I liked since Facebook took over. Perhaps
some stuff in the group chats that I liked but that's it. So if there's some
kind of momentum for another messaging app I'll jump ship early.

~~~
ramsr
In India, they recently launched payments within Whatsapp which is a major
breakthrough IMO.

------
coldtea
Well, too late, they've bought it now. WhatsApp is just Facebook itself.

------
paxys
Everyone knew this day would come the moment they announced the purchase

------
bassman9000
Aside from Signal and Telegram, is there any worthy alternative?

~~~
axaxs
I compared them all at one time. Encrypted by default was a must, the rest
were excluded.

Signal - Featureless

Telegram - Not encrypted by default, and controversial encryption

Wire - Really liked Wire, but it had a bug of not doing push notifications
correctly. Many missed messages until opening the app manually and seeing
them.

Viber - No real complaint with Viber I guess, I don't quite remember why I
didn't like it.

LINE - This is what I settled on. Nice interface, customizable, same
encryption as WhatsApp/Signal/etc, voice and video also encrypted E2E,
everything worked flawlessly. I wish more Americans used it.

In the end, LINE was the winner. That said, if Wire were to fix the issues I
had with them, I would choose it instead. I really like the fact that you can
use multiple devices with Wire, which is the only one that let's you do that.

~~~
24gttghh
>Signal - Featureless

Come now. Signal has group chats, document sharing, built-in GIF searching
(GIPHY), disappearing messages, encrypted calling (video and/or voice), oh and
the most important feature: text messaging.

~~~
reitanqild
Sounds awesome.

Who pays for it? (Honest question, I burned myself on WhatsApp.)

~~~
reitanqild
To answer my own question: it seems it is based on donations.

------
mtgx
Relevant post from earlier this year:

[https://www.washingtonpost.com/business/economy/whatsapp-
fou...](https://www.washingtonpost.com/business/economy/whatsapp-founder-
plans-to-leave-after-broad-clashes-with-parent-
facebook/2018/04/30/49448dd2-4ca9-11e8-84a0-458a1aa9ac0a_story.html)

------
kenrick95
Related blog post from WhatsApp: [https://blog.whatsapp.com/10000648/Growing-
our-Tools-for-Bus...](https://blog.whatsapp.com/10000648/Growing-our-Tools-
for-Business)

------
gonvaled
I would pay for some extra features. From the top of my head:

\- several accounts (phone numbers) managed in a single WhatsApp installation

\- auto-forward messages from one number to another

\- integration with other services (gmail, gdrive, ...)

\- api, to scratch my itches

------
scblock
Next up: nonlinear timeline!

------
caioariede
I'd be happy to pay for premium feature, like extra privacy controls and no
ads

edit: clarifying, I'd love to be able to not let people know when I'm online

~~~
sanlyx
AFAIK You can hide your online status/last seen for the price of not being
able to see other people's

------
nell
I wonder if that is why they opened up their API to Twilio. Twilio can now pay
Whatsapp whatever it has to pay the carriers to send/receive SMS.

~~~
Ensorceled
Given how little Twilio charges per messsage, this can not be a serious money
maker for Whatsapp.

~~~
nell
While the revenue from Twilio itself is insignificant at Facebook scale, it
could be a sign that they will open up more to partnerships around the worlds
without having to include advertising.

------
navidfarhadi
They could always try charging 1 USD/year for the service /s

------
fiatjaf
Great news! Now this madness will stop. Suffer, WhatsApp users!

------
fraudsyndrome
If they want to charge for it they better make it easier than it is currently
to migrate over chats from iOS to Android and vice versa.

iOS to Android was okay, still had to pay ~$10 for it. Going from Android to
iOS was very difficult so I lost a lot of my chats.

------
mariocesar
Is there a link without a paywall ?

~~~
tchen
[https://outline.com/8C7BNH](https://outline.com/8C7BNH)

------
moe_32
Time to disable Whatsapp. It keeps draining my battery as it is.

