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.
During my b-school classes, it dawned on me that things are much more complicated than I had thought. Marketing and sales are very hard, very quantitative, and can make or break a company. Corporate planning from a cost / revenue perspective is super critical. Steering a large organization and navigating personalities and power structures in such a company is difficult and squishy.
Certainly, some MBAs are full of sh but I've also run into plenty of engineers who are full of sh. I think it's hard to stereotype. When I first started business school I thought everyone would be the stereotypical investment banking jerk. Instead, I was pleasantly surprised that most people were fun, very sharp, pleasant, intellectually curious, and they really respected folks with a technical background. Exposure to them broadened my own worldview in a number of different ways. Sure, you don't need an MBA to run a company. But you also don't need a CS degree from MIT to be an awesome engineer.
Back in the Colonial times, sharp smart lads went to prestigious military schools and learned the complexities of how to subjugate conquered people. How to efficiently run a slave camp. How to squeeze every unit of labor off the peasants, etc. People went to these schools were probably very cultured, polite, and were funny and pleasant at social events. But history will judge them harshly
Would not be surprised if the same thing happened to MBAs when the tide of history turns in a few centuries. Maybe squeezing profit off of people will no longer be ethical or acceptable, even if your model is complex and intellectual
Leading me to my question: is your post satire, or do you really consider charging money for a service to be morally equivalent to murdering natives?
I don't see any evidence for that - and in fact, GP proposed/reminded of an alternative business model for WhatsApp.
In the specific case of whatsapp, it would be interesting to see what would happen if the service did offer a $1 a year subscription. I’d pay, assuming that data wouldn’t also be used or sold for advertising. But I have a gut feeling that most wouldn’t, they’d rather switch to something that cost nothing, even over something that was very cheap.
Psychologically the gap between free and any cost is large. Which means that for a business, people are either willing to jump that gap or not. The price itself isn’t really a huge factor, it’s free vs not free, so the price may as well be higher than $1, or whatever the minimum viable amount is.
Also the post above was making some wild comparisons that I wanted to point out are silly.
Source? My understanding was military academies focus on tactical leadership, military conduct and often an engineering background.
It also depends on what you mean by colonial times, military academies didn't show up in the U.S. until the 1800s.
> Maybe squeezing profit off of people
I think the parent's point was significantly more nuanced than this characterization.
That expertise had to come from somewhere.
I am afraid your comment sounds like it is trying to find some silver linings in the oppressors malevolence but please try to sympathize (if you cannot empathize) with those colonized.
> I am afraid your comment sounds like it is trying to find some silver linings in the oppressors malevolence but please try to sympathize (if you cannot empathize) with those colonized.
No, I was pointing that the schools decried by the parent were also where the persons who led some of the conflicts for independence were taught in the same school; I was defending those schools.
And I would like to point out that they would’ve improved otherwise had the natives weren’t oppressed. In other words, the oppressors destroyed the ability of the natives to improve. The so called improvements happened despite being oppressed.
As for defending the schools, the same point applies - the oppressors destroyed the systems of education. Had they not invaded the natives and kept there greed to their homelands their wouldn’t be any need for defending these schools.
Edit: a word and newlines.
Could you please describe me such a scenario/situation where it would’ve or has had happened? The point of my argument hinges on the natives unability to improve due to the oppressors malevolence.
> And most of them didn't have systems of education before the colonisation.
Sure, most if not all of them didn’t have a Europian styled system of education. I don’t suppose you’re saying that the natives didn’t have any concept of educating their children? And yes, it would’ve improved too had they not been not destroyed …
Finally, I think we’ve digressed too far off the main thread of discussion. I feel like I am in the middle of https://www.xkcd.com/386/
Yes the empire was a dictatorship that conquered them and in the early era, bought slaves from the local rulers. In the late eras the empire built infrastructure, education systems, brought modern medicine, tried to teach civilised values like not beheading your political opponents and having votes instead, and in some cases as the empire faded, left the countries in a vastly better state than they were found.
Colonialism is easily one of the most complex and ethically grey areas I've found when studying history. There is no evidence or reason to believe those societies would have ever advanced were they not conquered.
We can still go a long way!
Lets be honest here, Whatsapp gathered hundreds of millions of users with a tiny team. Signal and Signal protocol made Whatsapp secure with less than 10 people on the team full time. So less than a hundred staff, 1.5 billion per year is more than enough resources to add get most of the benefits of Whatsapp to humanity. Leaving plenty of engineers, MBAs and who ever is left to go do more useful stuff.
I think that starts to approach a religious belief, so I don't think I want to get into that debate, but I have yet to see a system that works better than the free-market (plus a reasonable safety net )
Engineer > 1 - 4 years experience in IT/Engineering etc > 2 Year MBA from a reputed college > Management role in related or a completely different field.
There is a general consensus in India that engineers can be groomed to be good managers. No idea why.
One more aspect to consider is that qualifying exams for top-tier MBA colleges in India (IIM's, etc) are somehow cracked more easily by engineers. Of course there are students from commerce / arts / etc that also crack and top these exams, but the trend till date is it's mostly engineers.
Also most of the top Indian guys in Silicon Valley (Sundar Pichai, Satya Nadella, etc) have are engineers from some of the top engineering colleges in India.
Just because you don't see the value in something, doesn't mean it doesn't have value.
MBA is the business equivalent of "<technology name> Specialist Certification" in engineering. It's for the second-rate.
MBA is highly dogmatic and highly prescriptive. It does not delve into the why. I can't draw a better analogy than the worthless certification courses that you'll find on the CVs of second-rate engineers.
If you want someone who is leading their field in some technology, you look for researchers, people with significant on the ground experience, people who understand the first principles, limitations, and capabilities of that technology. If you just want to fill the job slot with some rando, you'll settle for someone who has some stupid certification in said technology and thinks there's only one right way to use it because that's all they've been taught. MBA is the same thing but with a lot more self-congratulatory jerkoff. If you're in the right industry, it becomes easy to spot recent MBA grads. The way they talk to their subordinates, the way they talk to their superiors, even the way they act during downtime around coworkers - it's all part of the cookie cutter recipe they were fed and blindly follow. It's nauseating.
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.
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.
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.
"Finally, it's not MBAs who decided to focus on growth at all costs. It's the nature of the game."
It became the "nature of the game" because of them in the first place.
"Either you get to the top or your competitors will do that."
So what? In just about every field out there, there is room for more than one entrant.
Craigslist is greedy in a strange way. Craigslist is greedy over their the simplicity of their product and desire to hold on to their turf.
The company makes more than enough money to offer all kinds of improvements that need not markedly change how the marketplace behaves.
These features would not exploit the user or the user's experience. (In the spirit of this thread, "MBA" ideas)
When someone comes along and tries to ship the same thing, improved, and break TOS to get exposure to CL users, CL shuts them down. The big difference between craigslist and other startups is craigslist rarely incorporates competitive ideas into their product.
I support the position craigslist holds, but not the way craigslist holds it. I believe it will be toppled by a group less benevolent or be forced to add features at a date far later than it could have added utility to so many people's lives.
Well, that's an incredibly euphemistic take on it, if nothing else. Let's see someone try to "get exposure to" (scrape) Facebook's user graph for a competing product and see how long that attempt would last. I don't understand how people can feel entitled to data that CL gathers: obviously they'd be protective of it as it's their secret sauce/crown jewels.
That's literally their entire business model.
They could make so much money with all that data but stay true to their original goals of providing a classifieds service.
I'd bet that this is true of any degree. Not saying MBA providers don't teach useful stuff, but the degree is a terrible signal of quality--after all, it is by far the most popular graduate degree. I'd much rather work with someone who can state business options articulately and intelligently than someone with degree X; if this articulate/intelligent person happens to have an MBA that's great for them.
I don't get why MBAs get brought up at all.
First, go to Disneyland and look at the ticket prices. They're really high, right? On a per-day basis?
So next you price out the season passes. You do the math and you find that if you are going 6 or 7 days in a year or less, you are better off without the season pass. If you are going 8 or more days ( for instance ), the season pass makes more sense.
So you do the math and think about it some more. 7 or 8 days sounds reasonable, my family will enjoy it, right?
The next thing you know, you are happily shelling out $1000 per family member, thinking of all the happy times you will have and all the money you are going to save.
A revealing sign that an engineer isn't running that shop would be the production climbing to 50 sandwiches. The same 5 people would be fooled into buying all of them by advertising, special discounts etc, then they would eat 5 each instead of 1 becoming obese, thus helping the medical business, and throw away the rest helping the trash collection and disposal business.
Or, the products could shut down, or lower their prices. If there’s no demand, why put energy into making demand rather than making something people want? It’s the lowest bar of achievement in this society; while I understand money can be a powerful motivator, this lowers the value of the entire work force.
Capitalism is, and always has been, about reaching a state where supply exceeds demand. One could argue that once a business reaches that stage, they can put up a Mission Accomplished banner and fire most of their workforce. But because of how wealth is distributed, workers always need to be working so they're incentivized to extend the work and market as long as possible.
The same mechanism is responsible for the situation where institutions tasked with solving a certain problem (crime, cancer, etc.) invariably end up perpetuating the problem so they can continue existing.
You think some shmuck MBA setting up a devious pricing structure at Disneyland is bad? Consider that the US has more empty houses than homeless people, and more unsold cars in lots than people who lack reliable transportation.
Those committed to non-violence do so without regard to whether they'll win or lose.
The players make the game.
I don't see the purpose of MBAs unless you are doing high level management at a mid-large company, and you are supplementing it with other (core) skills such as software development. The other reason you would take an MBA is if you want an equivalent knowledge set of a bachelors business degree without having formal training.
I think the MBA hate is warranted to some degree, because you see far too many people taking an MBA as a "backup" option. I've dealt with way too many people with MBA degrees that have no idea what they are talking about.
I'm a strong believer that business skills need to be won by hard-earned experience.
Very often, the engineer would get frustrated with this and look for work which is more interesting. That way, the company will be, increasingly, left with engineers who are there because they have no alternative.
Is it really common for lawsuits against normal sized companies? (I'm not talking intel, facebook etc.)
Some are full of it, some can sell. What about the rest, and what are the proportions?
Two, claiming encouraging more ads on your platform is "squeezing locked in users for every dime possible" is only half of the equation. Have you ever talked to a business that relies on Facebook and Instagram ads? They're enormously grateful they exist. Without them hundreds of thousands of businesses would not be possible. That shouldn't be thrown aside as worthless.
I initially ignored it then switched to it after they started to do end to end encryption and encouraged all my friends to use it, instead of Facebook’s Messenger.
So yes, they were already popular because the app was working on all platforms, because it is easy to connect with your friends and because it did what it was supposed to do without the crap.
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.
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.
There’s a huge difference in the number of people willing to pay for an app “that I can connect to everyone with” and those willing to pay for an app “that I can connect to only the other people willing to pay $1 for”.
Being the first mover is not a infinitely defensible advantage. If another app comes along but doesn't carry the $1 a year fee, it wouldn't be hard to motivate people to switch.
In many countries, WhatsApp is the defacto communication platform for businesses to communicate with customers.
I think it was R$1,99, that was not exactly US$1 (even considering the stronger Real in the period), however it was not exactly equivalent to US$1 either.
You should provide ample evidence for such an extraordinary claim.
Also let us be clear. Engineers are no saints either. Case in point Anthony Levandowski of Otto. Orchestrating one of the shadiest acquisitions to make a quick buck.
Folks have pointed out below that the issue of growth is not necessarily an mba or maximizing shareholder thing. In some competitive environments if you don’t do it, you will die. That said one can always do what DHH did with 37 signals...that was a specific choice. Nothing to do with having an mba or not.
One has to look at things with nuance, not just be black and white.
Whatsapp was sold for that much because many other companies were willing to buy for similiar amounts.
My guess is that if they enforced payments there wouldn't be any whatsapp now. We would be writing about one of their free competitors from that time now.
In the end customers are screwing themselves big time if they don't want to pay €. Software doesn't grow in trees.
He further explained that it may sound somewhat counter-intuitive: the reason why they made the app paid for some users was to slow their growth (similar to Facebook's college-only focus) so they could properly build out infrastructure and improve on the user-experience .
And a mobile messaging company relies on the network effect to stay relevant and popular.
They could try charging $1 per year now and see what happens. Probably a flood mainly to Facebook Messenger and in part to other apps.
Every user of these so-called free platforms pay way more than $1 yearly for using them, via products they have been pushed and attention they have lost. If you're a potential high-wage earner, you're paying more than that in an hour!
The tiers you suggest don't affect any layperson (would your grandmother even know what geolocated ads are? Would she care?). If anything, it sounds alarming to a layperson to even have these options.
IMO your comment is a clear example of why technical people should not always be the product decision makers.
The second renaissance of this unicorn investment bullshit will be micro-services run by small teams that bootstrap and market there way into profitability instead of asking millionaires to sign them blank checks hoping they will be the next SNAP.
The reason everybody uses WhatsApp is that they never paid for it -- in fact neither I nor anybody I asked can actually recall ever seeing payment UX on the app.
And its feasible. Back in the day there were carriers open to chat apps (eg BBM) and google play is one of the first merchants on direct carrier billing, despite every telco trying to control app marketplaces.
Fast forward to today and there are dozens of agent networks and wallet platforms for underbanked users and improvements in banking and DCB across the board. They wouldn't have had anywhere near 100% paying customers but entirely possible to get a majority.
Credit cards are the only platform I know to work reliably, but most people don't have them, and they are horrible to use online. If you don't have a credit card, what online, global alternatives exist? Paypal I guess, but using it is even harder than using a credit card..
The first wave was telcos, which largely failed with the exception of a tiny few (eg m-pesa in kenya, globecash in philipenes). Banks entered the frey but struggled. Then the new wave came around, led by Alipay and Wechat. They kick started their wallets by leveraging existing products (ecommerce, chat) before expanding it to point of sale. This model is growing strong (see go-pay, grab-pay, paytm).
But the whatsapp problem could have been solved by a far more traditional route. You dont need people to pay on whatsapp, but rather just need the $$ to get to whatsapp. For that type of thing electronic voucher distribution could have been leveraged, in the same way that play, games vouchers, itunes vouchers work.
So Whatsapp sell codes at a 5-10% discount to 3 large companies (paid in advance), who then onsell through a network of parties until someone wanders up to a street stall, gives a dollar-equivilent in cash to the owner of the stall and receives their code. The code when entered extends the subscriptions. Everyone in the chain takes a portion of the fee.
If your feeling particularly fancy you can replace the entire voucher with a realtime call that activates that persons subscription. But needs to be on a per-country basis.
How does Paul Graham explicitly stating "Startup = Growth" fit into this box?
Remind me where Mark Zuckerberg got his MBA.
If I was using it and the price went to a dollar I would probably continue.
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.
And also, WhatsApp wouldn't be making a ton of money. Payment processors take a huge bite out of $1 payments, the service does cost money to run, and it costs more money to continue to develop.
A monetization model that's not a subscription allows very poor people/people who are turned off by putting in a credit card number to stay on the system, while monetizing the majority of users for a much higher per-person value, thus meaning that WhatsApp would take in higher total revenue while maintaining their network effect and ability to appeal to new users.
You can see why they want to do the latter.
They implemented this fee whenever they were growing too fast and needed to slow they growth to keep their servers in check. At other times it was free.
I'm not really sure Craigslist is a good model here, I feel like their business is getting taken apart vertical by vertical as they fail to keep improving.
He said he instituted the $1 fee to try to slow down a relentless increase in new users because he was afraid of potential outages.
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.
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%.
No, they won’t install Signal. If that were a real possibility, you would have done it already. So SMS it is. But I wonder, isn’t SMS more expensive than $1 / year? SMS has had outrageously high rates compared with 3G.
In some parts of the world that’s precisely the reason for WhatsApp’s popularity.
SMS is plaintext - full stop.
Well, no, because I'm perfectly happy using WhatsApp in its current state.
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.
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.
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.
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.
I would pay for whatsup through paypal or something like that.
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.
I still think it's weird to have a product that worth so little to people that they won't pay a dollars a year, and yet it seems to essential in their everyday life.
Regardless, it won't get Facebook the billions they spend on WhatApps back.
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.
Many of the telecos, however don't want their user's on WhatsApp, they want them to use SMS, I remember Airtel and other's complaining to the government about OTT services, and trying to force the government to introduce a licensing regime for them.
If WhatsApp has to depend on telecos, they for sure will screw it.
Also unlimited SMS are free these days.
On Airtel, which I use- 4G data 2Gb/day, Unlimited SMS, Unlimited calls(Anywhere in India), for 90 days, comes to like $9(around 599 rupees).
This is a pre-paid plan.
If someone can't pay that they're a waste of bandwidth for facebook's ads, since they can't afford to purchase anything at all.
If what you say is true Facebook can pull the plug on India completely and save money. I doubt that what you say is true.
Yes, and they're a PITA on so many levels. Also, Messenger already has ads.
> Telegram (which has much better groups anyway)
Yes, groups, and especially supergroups (which are highly reminiscent of IRC) are downright awesome.
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).
The real issue is they can't compete with $0.
Also best way WhatsApp can work around this is to just ship their app with the phone, and bill the phone $1 * avg life of the phone.
Heck, I think I'd admit was like that, once upon a time. I stopped only when I started earning enough to be able to spend relatively liberally, sometimes even without looking at the exact price, as well recognized my time's worth something too.
I wonder if the products that Google and Facebook offer would actually be of better quality if they actually charged a certain amount to access their services. They have become so essential that I believe in most markets they could charge $5 to $10 a month and still retain a significant amount of users.
Then again, it gives them an excuse to not have to actually have a decent support staff.
Moreover, Google made ~$15B in Q2 2018 in USA alone. 86% came from ads, so let's assume Google made ~13B from ads in the USA in Q2-18. Even if we were to assume that each of the 240M internet users in the USA pays $10/mo to Google (an obviously false assumption), that is still only $7.2B for Q2-18, or half the revenue they are making from ads.
Because I have Youtube Red I don't have ads, and I can download videos on my phone. Except I can't really download videos, I just kind of cache them in an inaccessible format that randomly fails. Seriously, it's very common for me to go back to older downloaded videos and have Youtube randomly tell me, "well, it's messed up, we'll have to redownload it later."
On top of that, using Youtube Red means that I have extra ads for Youtube Red specific channels that I can't permanently get rid of. On top of that, using Youtube Red means that Google will occasionally decide that I'm not allowed to watch videos on my phone and computer at the same time, because that's "using the account in multiple places."
What I should be doing is using youtube-dl to auto-download playlists without ads and then sync them to my device. But I'm still paying for it, because... I don't know why, I guess I'm lazy. But there's very little reason for anyone to purchase Youtube Red when they can get a better, more private experience by downloading an ad blocker.
The problem is that Youtube offers both a free tier and a paid tier, right next to each other, with no signficant improvements to the paid tier. You're still getting the same algorithmic, eyeball-grabbing, buggy crap in Youtube Red. So I'm skeptical that this is a good comparison - if your goal with paying for apps is to get away from the dirty feeling of having someone watch you and manipulate you, Youtube Red is never going to satisfy that, because it's always going to be developed alongside the free version and it's always going to be reusing that codebase.
Compare that to something like Netflix. Do you think it's a mistake that they don't offer a free tier?
Also YouTube has all the music that people care about and given the success of streaming services I’m going to guess that its lack of success has nothing to do with people not wanting to pay.
I'm not suggested that people in poorer economies should be deprived of targeted advertising. It's just surprising they wield such influence. I guess they make it up in volume.
They're planning for the future. Those people will be the major consumers of the world. The companies that can gain market share in emerging economies now will reap the rewards.
Not being able to afford and not being willing to pay are separate.
That's a big if, though. I wouldn't pay $1/year for WhatsApp messaging as a consumer. But I have a lot of disposable income. When you have a free substitute, these signals get mixed up.
I live in South Africa and I'd pay $50 a year. Throw in a few paid-only features and I'd be quite happy.
All my friends use it. We use it at work for many teams. Video call with family in Australia. Audio with friends in Toronto or Chicago via Bluetooth while driving. That feels like magic. Better quality audio then the cellphone network and just works.
I have Skype, messenger, telegram, had Viber, tried WeChat. Barely use any. WhatsApp is like SMS, focused on my phone contacts, but has groups, audio, video, photos. That's all I want.
Here's an article discussing a local cell data bundle. It's still $1-3 per month. Poor people are willing to pay that because of the better value compared to SMS and voice call costs.
It may sound cruel, but is it crueler than saying "Since you can't afford to pay, just give us access to your emails and private messages"?
Facebook has a different business model and a different mission than those companies.
It really is more cruel to say that because you, in a first world country, can pay 1 dollar much easier than they can pay 1 dollar, you should decide that they're not allowed to pay with their data if they desire.
We're talking mind-boggling levels of poverty. How are they able to even pay for a phone and mobile subscription? Where do they live? How do they eat?
It sounds to me like a made-up sad story used as an excuse for rich corporations. If there are people that poor out there, Facebook could charge the rest of the world while offering the service for free to those that really can't afford it.
Even if you use whatsapp on a $50 phone (which you use for say 5 years) with a $3/month plan (which seems incredibly cheap), you have amortised costs of $46 per year. Increasing it to $47 to get whatsapp does not seem as unreasonable as you suggest.
Malawi is also an _extremely_ poor country, for reference Bangladesh have ≈ 5% smartphone usage with a GDP of ≈ 4000 USD per capita (PPP) while the GDP of Malawi is ≈ 1000 USD (PPP) per capita.
I would argue that not paying (but having the means to actually use whatsapp!) is more of a choice, or lack of payment infrastructure, rather than not having the disposable income to spend 1 USD per year for the service.
If India and Malawi and whatever other country can't pay for WhatsApp, they don't get it or Facebook makes it free just for them. Or they find a way to make the ones that can pay do so.
What's the big deal?
You don't see them telling the FB Messenger team: "Hey, you need to make money."
WhatsApp was acquired February 2014 and end-to-end encrypted April 2016.
> And I am 100% confident that is why they want to find a way to monetize it directly. Not having access to data is not something they are used to.
> You don't see them telling the FB Messenger team: "Hey, you need to make money."
I mean, I'm sure they have. Messenger has ads.
Most of their users come from countries like India(Im an Indian). Where people are very price conscious. And yes they would move on to other free services if charged.
>>because apparently paying $1 per year for using an application on your $999 phone is outrageous
Most smartphones on which people use WhatsApp in India are less than $100 phones. These days you get good usable smartphones in India for around $50 as well.
>>but I wonder why can't they just make it an option again as an alternative to ads.
Because bandwidth costs money.
Best way out of WhatsApp is to ship their app with the phone and have the manufactures charge $1 * avg life of the phone.
Ads are the only way. Even if you want to pay a subscription instead.
Maybe that's why the WhatsApp founder left.
The strain of all these hidden costs is way more than $1, probably on the order of $30. So WhatsApp reaps $1.5B and dumps $45B worth of externalities on its user base. I refuse to pay.
To me, its not necessarily how well are our projects doing. Its more, squeeze out the most we can get from every asset and then squeeze for more.
I understand that Facebook will run just fine with or without the 20%, but I can imagine hearing this news and then looking around the room to find what acquisitions haven't performed well. Almost like a "What have you done for me lately?" vibe. Yes, its a bit warped to think that way (but fun too).
A bonus is to combat competition like Snapchat to Instagram by having a solid alternative.
I didn't notice but is there ads on WhatsApp?
"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."
"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."
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 . A big bank in Brazil has already tried to grab this market by creating a keyboard with wire transfer integration .
This model is very similar to what WeChat has done in China.
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.
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.
WeChat definitely does many of those things, but that’s far from it’s only monetization Model
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.
You could also, you know, charge money for the service.