Founded in 2009 by Brian Acton and Jan Koum WhatsApp is a messaging app acquired by Facebook in 2014 for $19B. In 2018 WhatsApp rolled out customer interaction services. WhatsApp might be transitioning toward a set of features from video chats to social commerce that might transform WhatsApp into a Super App.
WhatsApp origin story
Brian Acton and Jan Koum, who had previously spent 20 years combined at Yahoo, founded WhatsApp in 2009.
As reported on CNBC, Jan Koum affirmed:
“It started with me buying an iPhone; I got annoyed that I was missing calls when I went to the gym.”
That’s how they managed to build an app that made them show their status, and he added: “We didn’t set out to build a company. We just wanted to build a product that people used.“
In 2009 WhatsApp got its first seed round for $250k. In a few years, WhatsApp became a hit, and in 2011 and 2013, WhatsApp got $60 million from Sequoia Capital, with the first round of $8 million and the second round of $52 million.
WhatsApp is a pun on the phrase What’s Up, which started as an alternative to SMS.
Advertising is a broken business model, according to its founders
As reported on the WhatsApp blog by its founders Koum and Brian Acton:
When we sat down to start our own thing together three years ago we wanted to make something that wasn’t just another ad clearinghouse. We wanted to spend our time building a service people wanted to use because it worked and saved them money and made their lives better in a small way. We knew that we could charge people directly if we could do all those things. We knew we could do what most people aim to do every day: avoid ads.
Advertising isn’t just the disruption of aesthetics, the insults to your intelligence and the interruption of your train of thought. At every company that sells ads, a significant portion of their engineering team spends their day tuning data mining, writing better code to collect all your personal data, upgrading the servers that hold all the data and making sure it’s all being logged and collated and sliced and packaged and shipped out… And at the end of the day the result of it all is a slightly different advertising banner in your browser or on your mobile screen.
Remember, when advertising is involved you the user are the product.
This showed how reluctant they were about advertising as a business model.
The paradox, though, is that the company would be acquired by the largest digital advertising network after Google in a couple of years.
The Facebook acquisition
It was June 18, 2012, almost two years before WhatsApp got sold to the most profitable advertising network on earth, Facebook Inc.
In a previous post, they said:
So first of all, let’s set the record straight. We have not, we do not and we will not ever sell your personal information to anyone. Period. End of story. Hopefully this clears things up.
On February 19, 2014, when Facebook acquired WhatsApp. As reported on Facebook financial statements, Facebook “paid approximately $4.6 billion in cash and issued 178 million shares of Class A common stock in connection with the acquisition of WhatsApp” this is how it was announced on WhatsApp blog:
Almost five years ago we started WhatsApp with a simple mission: building a cool product used globally by everybody. Nothing else mattered to us.
Today we are announcing a partnership with Facebook that will allow us to continue on that simple mission. Doing this will give WhatsApp the flexibility to grow and expand, while giving me, Brian, and the rest of our team more time to focus on building a communications service that’s as fast, affordable and personal as possible.
Here’s what will change for you, our users: nothing.
WhatsApp will remain autonomous and operate independently. You can continue to enjoy the service for a nominal fee. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using. And you can still count on absolutely no ads interrupting your communication. There would have been no partnership between our two companies if we had to compromise on the core principles that will always define our company, our vision and our product.
WhatsApp founders remarked once again that its business model would not change toward anything related to third-party ads.
Things would start to change in a couple of years.
Suppose Facebook isn’t planning to monetize WhatsApp directly in the long term.
What plans and how will it integrate with its overall products in the long run?
- Founding and Acquisition: WhatsApp was founded in 2009 by Brian Acton and Jan Koum. In 2014, Facebook acquired WhatsApp for $19 billion.
- WhatsApp’s Origin Story: Jan Koum was inspired to create WhatsApp after missing calls at the gym. The app aimed to provide a simple and efficient means of communication.
- Early Funding and Growth: WhatsApp secured its first seed round of $250,000 in 2009. Subsequent funding rounds, including $60 million from Sequoia Capital, helped fuel its growth.
- Advertising Disinclination: WhatsApp’s founders expressed reluctance towards advertising as a business model. They aimed to build a service that added value to users’ lives without resorting to ads.
- Facebook Acquisition: Facebook acquired WhatsApp in 2014, paying around $4.6 billion in cash and issuing shares. WhatsApp was promised autonomy, no ads, and no compromise on core principles.
- Shift towards Business Interactions: In 2018, WhatsApp introduced tools for businesses to interact with customers. Businesses could provide information, start conversations, and offer support through the platform.
- Freemium Growth Model: WhatsApp shifted to a freemium model, eliminating subscription fees and exploring communication tools for businesses. It began charging businesses for specific interactions.
- Privacy Concerns and Founders’ Departure: WhatsApp founders left Facebook in 2017, reportedly due to disagreements with Mark Zuckerberg. Privacy concerns and data-sharing changes were factors.
- Facebook’s Integration and Policy Changes: Facebook integrated WhatsApp more closely with its products, raising concerns about data privacy and sharing.
- Future Focus on Social Commerce: WhatsApp began focusing on social commerce, introducing features like catalogs for businesses. It also explored new ad formats and tools for businesses.
- Facebook-Jio Deal: Facebook acquired a stake in Jio, an Indian conglomerate, to transform WhatsApp into a Super App in India. The aim is to integrate communication, payments, and business services.
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