Facebook owned chat app WhatsApp has pulled an unexpected move on the most popular messaging app in the world, dropping the easily available $1 per head in favor of tougher and much better ways of generating revenue.
From a user point of view, WhatsApp has more than 900 million users, a figure that is expected to be somewhere near the 1 billion mark. With the company’s subscription approach, it could mean that it collects almost a billion dollars every single year, courtesy of the $1 fee charged for using the app for the second and subsequent years. However, the company has chosen a different path, a path that Facebook has always succeeded with.
The social networking giant bought WhatsApp for a whopping $19 billion in 2014 and since then, it had yet to make a single cent from the company apart from the annual fee, which has now been scrapped. Many have been pondering on how the company was planning to make money out of WhatsApp; since it has a policy of “No Ads, No Gimmicks and No Games” still driving it.
While this might seem a weird move by the company given that many services are now moving towards the subscription approach, for instance, Netflix and HBO, Facebook seems to be ready with a plan of how to get the most out of this app. What usually happens with these subscription-based platforms is that the users can get access to ad-free high quality content for a certain fee, but those using the free version will have to put up with the ads offered on the services with respect to revenue generation.
According to Jan Koum, the co-founder of the app, the idea behind dropping the $1 fee is not because the company doesn’t want to make money, but it’s because of the regions in which the app is vast. Even though it has over 900 million users, most of them are found in developing nations where access to credit or debit card services is still a dream for many. As a result, Koum notes that it becomes a problem for these persons when they want to pay for the app, which eventually pisses them off.
As a way of dealing with this situation, the company has therefore decided to do away with the fee and instead focus on a business model that will allow the company charge business users of the app. Just like Facebook Messenger is doing with its commercial offerings, WhatsApp wants to become a platform where business persons meet their clients.
Rather than offer WhatsApp on a freemium basis, the company wants to integrate commercial participation such that business entities are soaked to consumers, something similar to how Google offers free search services, but charges the search-driven ads that show up next to the results.
In making this move, Facebook has clearly resisted the temptations of going for easy money ($1 per head) and instead it wants to focus on the bigger business.