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But their WhatsApp business model was not self sufficient. They were charging $1/year which is less than the operating cost of the servers and bandwidth.
by ggg9990 9y ago
But their WhatsApp business model was not self sufficient. They were charging $1/year which is less than the operating cost of the servers and bandwidth.
- saagarjha 9y ago> They were charging $1/year which is less than the operating cost of the servers and bandwidth Are you sure of this? If they have a billion users, they're earning a billion dollars a year off of this. Considering that they don't need to store messages for an extended period of time, or run analytics, do they really need all that much?
- downandout 9y agoMost people weren't actually paying. Apparently, the vast majority of users were granted free lifetime memberships (see comments here [1] and article here [2]). When Facebook acquired it, it only had $10 million in annual revenue [3] against 450 million users. Clearly, most users were jumping on board during times when it was made available for free. [1] http://www.idownloadblog.com/2013/07/16/whatsapp-goes-free/ http://www.idownloadblog.com/2013/07/16/whatsapp-goes-free/ [2] http://www.iphoneincanada.ca/recommendations/whatsapp-messenger-is-currently-free-in-the-app-store/ http://www.iphoneincanada.ca/recommendations/whatsapp-messen... [3] https://www.recode.net/2014/10/28/11632404/facebook-paid-19-billion-for-whatsapp-which-lost-138-million-last-year https://www.recode.net/2014/10/28/11632404/facebook-paid-19-...
- fasj82 9y agoDo you need more than $10M/year for 450M users? As I've said in another comment they barely stored anything server-side and it's known they have a very optimised stack
- downandout 9y agoYou do if you’ve been acquired for $19 billion. The founders couldn’t have been naive enough to think that Facebook and its shareholders didn’t have a need to monetize such an enormous investment. Facebook is not a charity, it’s a business.
- DSingularity 9y agoFacebook monetizes Whatsapp by limiting its growth. You can easily think of all the “social” functionality Whatsapp could have added in competition with FB and Messenger.
- kerng 9y agoFacebook paid 19 billion to buy up competition, as WhatsApp was a threat to the Facebook ecosystem.
- unlimit 9y agoThat is what I am seeing now here in India, folks in my circle barely post anything to facebook now, all pictures, status messages are on WhatsApp now.
- BurningFrog 9y agoIf FB pays $19B for every messenger competitor that gets traction, that's a huge incentive to make more of them.
- bryanrasmussen 9y agoyeah but now you have to compete with WhatsApp to get that traction, so maybe a hard slog.
- sjclemmy 9y agoAnd if FB shut down WhatsApp, users will be looking to go elsewhere, and probably not FB Messenger.
- 9y ago
- paxy 9y agoHosting is pretty far down in the list of operating costs for a business. Employee salary, benefits, marketing etc. is where most of the money goes.
- fasj82 9y agoWhatsApp had 55 employees and I'd say it had no marketing to speak of.
- sanderjd 9y ago55 * $100,000 is already $5.5 million. Revenue of $10M/year seems pretty tight to me, for a 55 person company.
- paxy 9y agoReal costs per employee are 2-3x the salary anyways.
- kbenson 9y agoI find that hard to swallow for a small company size, such as being discussed here. Do you have a reference or some reasoning to support this? I'm interested to know where it comes from.
- ghaff 9y agoBenefits, office space, equipment, T&E, employment taxes, etc. This is an old article but it suggests about 2.7x. [1] I agree that it might be less for a startup assuming a frugal startup but it's probably at least 2x salary on average. [1] http://web.mit.edu/e-club/hadzima/how-much-does-an-employee-cost.html http://web.mit.edu/e-club/hadzima/how-much-does-an-employee-... (This is old but nothing really substantial has changed except.)
- michaelt 9y ago
- hinkley 9y agoLet’s say you figure out how to run a company with 100M customers with only five employees. What stops me from getting together a few friends and stealing your business model? At some point you have to add value just to keep the wolves at bay.
- neuland 9y agoNetwork effects?
- EGreg 9y agoRed Queen effect
- salawat 9y ago...So you'd try to solve the same problem with a different sticker to score quick cash? I'd like you to read this and contemplate. http://www.catb.org/esr/writings/unix-koans/ten-thousand.html http://www.catb.org/esr/writings/unix-koans/ten-thousand.htm... If you didn't bother reading and contemplating, here's the gist: There is no wolf to fear. We are all finite beings with finite time and resources. You 'stealing' his hypothetical business model doesn't really accomplish anything except tie up your resources retracing his steps. You would be the fool reimplementing the pipe. Now if you are the type of person who reduces life down to only pursuing the almighty dollar rather than trying to solve difficult extant problems... Well... Maybe that would be worth it to you. Even then though, he has already captured his audience, and he'll likely have a reputation advantage over your copy. Anywho. Food for thought.
- dvt 9y ago> Let’s say you figure out how to run a company with 100M customers with only five employees. That's not how it works. I'm pretty sure you and I could write a Snapchat clone in a weekend. This doesn't imply we'll ever reach 100M users.
- ggg9990 9y agoYou could write a Snapchat “clone” but not with anything close to its performance. Snapchat has to be the most performant app I have ever seen.
- ghazak 9y agoThey did a great job avoiding taking too much funding though!
- reitanqild 9y agoI started paying before they were bought, I might even have paid twice and I loved it. Would happily paid for a few famuly members as well. Also there should be a huge possibility to increase revenue by selling API access (think appointment reminders etc as well as the whole bot ecosystem). When Telegram started they talked about price and I think I remember being unconvinced. I wanted to pay. As we (used to) say here on HN: if you're not paying you are the product. (Of course now we have learned that some companies charge us and still sell our (meta)data and advertise to us.)
- paxy 9y agoIn 2015, when WhatsApp had ~1B active users, Facebook said that the overall revenue from it was insignificant enough they they were just making it free. I'm pretty sure it wasn't charging the vast majority of users (which is how it got popular in developing countries in the first place).
- lucb1e 9y ago> Facebook said that the overall revenue from it was insignificant enough they they were just making it free Have you considered that Facebook might not be telling the whole truth? "insignificant" compared to what, how much money Facebook makes off of every extra user (who wouldn't want to pay) on their platform? Making it free can only be a profitable move because of what Facebook could do with the data, not because a few million dollars a year is truly "insignificant".
- nickpsecurity 9y agoArticles I read when Facebook bought them said they were losing money. Most reports I just Googled were subscription only or plastered with ads but here's financial sheets: https://www.sec.gov/Archives/edgar/data/1326801/000132680114000047/exhibit991auditedwhatsappi.htm https://www.sec.gov/Archives/edgar/data/1326801/000132680114...
- toomuchtodo 9y agoCan you provide a citation that pricing wasn’t sustainable? Having been an infra engineer previously, that pricing sounds reasonable for a messaging service based on infra costs.
- ggg9990 9y agoWhatsApp supports free encrypted video calling and picture messaging, even for groups. No way that it was covering costs.
- detaro 9y agoIt does now, it did not when it was aquired.
- saagarjha 9y agoWhy can't it? End-to-end encryption means you don't need to hold on to pictures for lengthy periods of time, and video calling can be done without a centralized service.
- testvox 9y agoNeither of those costs anything extra to run though. Since it's end to end encrypted with no sever backups the images and video can be communicated directly between the clients, WhatsApp just plays matchmaker.
- icebraining 9y agoIt could, but that's not how it does, they store the (encrypted) media in their servers so that both phones don't need to be online at the same time, and also to avoid having to upload multiple times when you send to a group. That said, they shouldn't need to keep them around for that long, unlike FB and similar.
- GFischer 9y agoVideo and voice calling are peer-to-peer. The only cost is the signalling server. I have a similar service, and it scales pretty well.
- bkruse 9y agoAre you sure? They were adding 1 million users/day http://www.thefactspeak.com/whatsapp-adding-one-million-user-per-day/ http://www.thefactspeak.com/whatsapp-adding-one-million-user... Even at $1/year - their 1.5 billion active users should be an equal amount of revenue. I'd say that's enough to cover the cost of servers and bandwidth.
- product50 9y agoBut that is it. If all you want is basic messaging then you are probably right. However, if you are trying to build a messaging platform, which is what probably FB intends to do, then it requires more investment. Today, you might think that that is where the problem. All the users really want is basic messaging. However, in 3-5yrs from today, the reality may be very different (see WeChat or LINE in APAC) and WhatsApp maybe a complete misfit in that world. All good products evolve. For something like messaging, if all you provide is a basic product, then you risk yourself being taken over by default platform apps (such as what happened with iMessage on iOS in US). You need stronger lockins and FB is well suited to provide those.
- oblio 9y agoIf you make messenger users pay anything for it, you’ll lose 80% of them on the spot.
- mars4rp 9y agoat the time of accusation, WhatsApp was running on 16 servers! Erlang is idle for communication, they had like 1 million concurrent user on each server!!!
- AlexandrB 9y agoIt feels like modern web design practices have grossly skewed people’s estimates of what it costs to deliver a service. Text messages are not fundamentally hardware intensive to deliver - unless you add tracking, “machine learning”, ad delivery, and mountains of JS for serving the app itself dynamically.
- bluedino 9y agoOr write the service in Ruby
- wpietri 9y agoI adore Ruby, but I think that's fair. Twitter's failwhale-heavy Ruby experience is a good example. Ruby and especially Rails are good examples of trading hardware for programmer convenience. This is absolutely great when you're banging out an in-house app for 100 people, and there's no problem spending $1 per user-month on hardware. But Twitter's revenue is only $0.60 per user-month, and they need to spend on things besides severs. There is a reason that they needed to switch away from Ruby to a much more complicated architecture: https://blog.twitter.com/engineering/en_us/topics/infrastructure/2017/the-infrastructure-behind-twitter-scale.html https://blog.twitter.com/engineering/en_us/topics/infrastruc... I also saw some people go the other direction. They had a Java app for serving a high-volume website. But the developers had a rewrite itch, and the execs were afraid they couldn't get acquired without a more hip technology stack. They even hired a fancy consulting firm to help, but when the first version was ready to go it was incredibly slow. Like two orders of magnitude slower to render a page. The rendering times were considered normal in Rails-land, but were a real problem at volume. So they spent another 6 weeks putting in a lot of caching while the ops people ordered a bunch more hardware.
- 9y ago
- textmode 9y agoAccording to this interview the addition of the $.99 charge was to slow down growth. He wanted to be sure they could provide a fast, reliable service and was concerned they might get swamped by an influx of users. https://www.youtube.com/watch?v=puVxnKuFarA https://www.youtube.com/watch?v=puVxnKuFarA According to the interview: WhatsApp began as a "status" service. Original iPhone had no background or push notification; user had to start the app to check others' status. When Apple added push notifications to iPhone, they added this to WhatsApp allowing status to be "broadcast". Users in Europe were paying high prices for international SMS. These users saw that broadcast status notications were similar to international SMS, but free. Some of them suggested this to WhatsApp and so WhatApp added messaging. Then the app took off. WhatsApp used FreeBSD, Erlang and SSDs when, according to Koum, everyone in Silicon Valley was using Linux, Apache, MySQL, Perl (LAMP) and HDDs. Compared to others in Silicon Valley, WhatsApp had far fewer servers and employees per user.
- rurban 9y ago> everyone in Silicon Valley was using Linux, Apache, MySQL, Perl (LAMP) and HDDs PHP, not Perl.