In the big scheme of $19 billion technology deals, it’s a small-fry revenue stream -- $1 per year per user, with the first year free. Still, it’s a sign that no matter what evolves -- or doesn’t -- on the advertising front, WhatsApp has opened a crucial portal to future revenue. Keep in mind that while WhatsApp doesn’t record personal data, it does allow for archiving of what’s shared, and you can see how such a service could effectively charge for cloud-based storage of shared photos, videos and texts.
But the decision to be a fee-based service is as much a matter of setting a new consumer expectation as it is about the actual money coming in. If you look at the short history of digital communication, it’s typified by -- from a consumer perspective -- an unwillingness to pay for anything, from Skype to one’s favorite newspaper’s website.
While this has changed to a degree, I’ve often found the reliance on and expectation of ad revenue by media companies, social networks and other content companies to be unsettling. It presumes that users don’t mind ads that much, that advertisers’ budgets are bottomless, and that online advertising is effective. Just ask any site that has relied on online display ads whether that is always the case. It’s only recently that some major players -- like The New York Times, and Hulu, for instance -- have also chased a subscription revenue stream, and while the revenue doesn’t always make up for ad revenue shortfalls, it certainly helps build in the kind of recurring revenue that advertising does not.
Which brings me back to the Facebook/WhatsApp marriage. If there was ever an opportunity for the Facebook platform itself to charge its users -- maybe in return for no ads in the News Feed? -- that time has probably passed, even though it’s obvious that given Facebook’s MAUs (monthly active users), the social network is of immense value to most of its 1.1 billion users on an ongoing basis. While Facebook never would have grown as fast if it were a paid service, building a model where advertisers carry the freight is also a missed opportunity.
If you think I’ve gone off the deep end, here’s the thing: the WhatsApp founders agree with me, and it certainly hasn’t stunted their growth. At 450 million users, it is purportedly growing faster than Facebook ever did. Additionally, its founders hate advertising. Download the app and you’ll see what I mean. During the sign-up process, you’ll see a prominently displayed link that says simply, “Why we don’t sell ads.” The page it links to starts off -- provocatively -- with the following quote from the character Tyler Durden in the movie “Fight Club”: “Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need.”
What the WhatsApp founders write on the page after that is no less of an anti-advertising manifesto. A few choice excerpts:
Strangely, the alternative is a service like Facebook, which constantly has to balance user experience with ads, and maybe the downsides of that model are part of what Mark Zuckerberg was thinking about when he bought WhatsApp. With the possible exception of Google, any online company that relies solely on advertising revenue is a sucker.