WhatsApp Doc? Welcome to the 99c annual service fee

Jun 25, 2013

Some of the most exciting growth areas in communications can be obscured for the most obvious reasons. For instance those doing the growing might be loath to draw attention so as not to attract competitors. Those being disrupted (who can also see the evidence from their own stats) might be tempted to keep quiet so as not to frighten the shareholders while they figure out how to deal with the competition.

So it appears to be with WhatsApp. It's a cross-platform messaging app for mobile phones and until recently quite free and seemingly popular, mostly because of the way it goes about things. More on this in a moment.

We knew anecdotally that it was doing well. Many people I know use it despite their having almost unlimited texts on their 'plan'. And then of course there was KPN which suddenly rose up and attempted to surcharge WhatsApp (and other OTT services) but only succeeded in triggering a furore and Europe's first net neutrality law.

There was evidence, in other words, that it was making real waves.

Now some concrete facts. WhatsApp has broken radio silence to claim it has a cool 250 million 'active' (once a month at least) users - 50 million more than Twitter. That's important because Twitter can be used for roughly the same application (person to person messaging). WhatsApp also has nearly as many regular users as Skype (280 million - can also be used for person-to-person messaging). With those services, though, you have to log in and faff about.

So messaging. That can't be hard to do can it? Very low cost to initiate as an OTT service one would have thought, so low barrier to entry. So why has WhatsApp emerged?

It seems to have hit a sweet spot: part messaging, part social network (social 'group' rather than network); all mobile but very cross platform (it's available on just about everything), and it's easy and elegant to use.

You might almost say, 'It just works', to borrow a marketing phrase from JOYN - the telco attempt at a federated OTT-style services to follow on from SMS. Most important, it only costs $0.99 which is paid once a year when the user updates (must update) the app.

That's an elegant approach to billing - users may have trained themselves not to pay for services, but a dollar for a key mobile app is (probably) very acceptable to many. We'll now have to see how the charge affects WhatsApp's active user total and how subtly the company can nudge users into a paid download.

Let's just imagine they manage to keep 200 million of their 250 million users. Factor in the customary 30 per cent rake-off by the app stores and WhatsApp is grossing something like $140 million per year and probably still growing.

The interesting point here is that WhatsApp naturally considered and then dismissed advertising as a route to monetisation - judging accurately that people in message mode would find ads extra annoying.

So back to the 'why has it done so well?' question.

My sample of teenage girls (three daughters, not the scrapings of a bunga bunga party) is that they like WhatsApp's group send capability. The system uses the mobile's telephone number for identity - that means the app can rummage through the user's contact list to identify all the people that also have it. Those in a friendship group can then be selected (or texted to be told to download WhatsApp) so you have a nice little message group operating cross-platform (though not including the PC or tablet users). This may not be a problem because they don't actually want to use it on the big screen.

"Why don't you use the messaging on Facebook then?" I ask.

"We use Facebook to set up a meeting or an outing or whatever, but once we're all moving we use WhatsApp to keep in touch. So if you're running late you just have to send one message and everyone going (and only those going) gets it."

So while the lack of PC messaging client often gets mentioned as a drawback by those who don't use WhatsApp, for the dedicated user it may actually be a plus. WhatsApp is for the select group. Facebook is for the masses.

They also like the easy photo-send capability. You actually take and send the photo from within the app making it really easy and instant. One group that I watched closely (daughter again) always shot and sent their respective dinners to each other. Sharing a virtual meal you might say.

So what does this mean for mobile operators and their attempt to hold on to the open messaging market? I would say it rams home the point that message users don't necessarily want their services to interoperate... a theme I notice telcos tend to return to. Many actually like having different services for different contexts. This is not something that looks likely to change.

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