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Whatsapp had a great business model: $1 a year. With their current 1.5 billion users, that's nothing to sneeze at. It doesn't cost them $100M a month to provide

Whatsapp had a great business model: $1 a year. With their current 1.5 billion users, that's nothing to sneeze at. It doesn't cost them $100M a month to provide the service. I wish more companies were like Craigslist - happy to make an great profit and a lasting business by providing basic information services for a reasonable price. Instead, a bunch of MBAs want to rule the world by focusing on growth at all costs, so they can then turn around and squeeze their locked in users for every dime possible.

SamUK96 8y ago
How else is someone with an MBA going to make their qualification look like it means something? It's similar to marketing in many large companies for example, anyone will tell you that most of what marketing does benefits precisely no-one. Users get pissed off about adtech et al - but those "extra 5000 clicks per month!" sound really good in a meeting and without any context regarding sales and PR, etc...
wlesieutre 8y ago
Glossing over the fact that they probably wouldn't have all of those 1.5 billion users if it had stayed a paid service. Even at $1, having to pay money pushes people off to other free platforms.
- pmlnr 8y ago
  So? It would still be profitable. Not everyone has to use the same thing.
  - sushid 8y ago
    Sure but it will start to erode its market share as other companies offer similar but free products. And a mobile messaging company relies on the network effect to stay relevant and popular.
  - pmontra 8y ago
    One of their free competitors would have grown to 1.5 billion users and whatsapp wouldn't be able to charge money for the same product. They would have had to pivot to something people would pay for or close or sell for a much smaller amount. They could try charging $1 per year now and see what happens. Probably a flood mainly to Facebook Messenger and in part to other apps.
- reitanqild 8y ago
  Maybe not all those users but they where growing really fast despite announcing their business model loud and clear, - I'd say even to some degree because they were loud and clear about their business model: selling a great service.
- jethro_tell 8y ago
  You, could do tiered models as well. At a billion users they were running 11 servers. Free with ads and data sharing, .25 targeted ads no data sharing, .50 geolocated ads only. $1 privacy + the standard. 1.50 premium extra storage or w/e
  - sushid 8y ago
    The jump from free to $0.25 is the biggest hurdle of all. Right now, you basically don't need a payment form connected to your account to use Whatsapp. But you do with $0.25. The tiers you suggest don't affect any layperson (would your grandmother even know what geolocated ads are? Would she care?). If anything, it sounds alarming to a layperson to even have these options. IMO your comment is a clear example of why technical people should not always be the product decision makers.
  - Thiez 8y ago
    Those tiers wouldn't fly under the GDPR, at least not the free one.
- vesak 8y ago
  People are so mindbogglingly stupid that it hurts. Every user of these so-called free platforms pay way more than $1 yearly for using them, via products they have been pushed and attention they have lost. If you're a potential high-wage earner, you're paying more than that in an hour!
xkjkls 8y ago
How many of their current users would actually be paying $1 a year? Over the long term how many more? Most of these products want to be free. If I'm paying $1 a year to WhatsApp and see my friend using a different app without being charged for it, I feel like I'm getting screwed. I find it hard to think of WhatsApp truly being a long term product with that business model. Two, claiming encouraging more ads on your platform is "squeezing locked in users for every dime possible" is only half of the equation. Have you ever talked to a business that relies on Facebook and Instagram ads? They're enormously grateful they exist. Without them hundreds of thousands of businesses would not be possible. That shouldn't be thrown aside as worthless.
- iraphael 8y ago
  The power of mass usage comes into play here. IIRC, when WhatsApp launched, I was one of the early adopters. As it grew (and it became hugely popular in Brazil, where I lived) they switched to the $1/year model. Current users were auto-enrolled in a "free-for-life" plan. My friends who didn't have WhatApp would still sign up because everyone else was using it and, besides "$1/year? it's almost nothing".
  - balls187 8y ago
    Was it 1 Brazillian Real or 1 USD? In many countries, WhatsApp is the defacto communication platform for businesses to communicate with customers.
    - iraphael 8y ago
      I don't actually remember. I used to set all my settings to US/American ones because some apps were only in the US app store, so there's a good chance I was looking at the US$1 price. Not sure what my friends saw in the Brazilian app store.
      - kawera 8y ago
        It was the equivalent of US$1 in reais.
kosei 8y ago
The vast majority of customers would switch off Whatsapp to free competitors if the service had a price. If more companies go this path, sure, but the market has shown so far that people are willing to put up with ads in exchange for not paying money. We see this in pretty much every industry from TV to online content. Whatsapp does not have enough of a competitive advantage to charge a premium and hope to keep its customer base.
- wolco 8y ago
  I would rarely use a product I needed to pay for. On the other hand the products I pay for I usualu get more enjoyment and/or more productivity. If I was using it and the price went to a dollar I would probably continue.
Smirnoff 8y ago
Ok, I agree that some MBAs can be full of it but can we already stop this MBA hate on HN? I feel like lots of people here think that if you build something then customers will surely come. I've got a huge surprise for you. You will have to sell your product and some of the MBA's are really great at that. In B2B a single sale can make or break your company when you're low on cash. You do your job and let them do theirs. You code, talk to users, ship, and iterate. They handle sales, operations, marketing, and maybe fundraising. These other things can be done by a technical founder but they are not fun. There is a reason why some companies hire COOs so that CEOs can focus on their job. Finally, it's not MBAs who decided to focus on growth at all costs. It's the nature of the game. Either you get to the top or your competitors will do that. So don't hate the player, hate the game.
- oculusthrift 8y ago
  eh why feel bad for mba’s? some of the highest paid most privileged people in the world
- ythn 8y ago
  From my perspective, any company that goes public will eventually turn to crap (or go through decades-long crap/good cycles). It's not MBAs that drive for growth at all costs - I would argue it's shareholders. Shareholders are greedy and don't care about anything else besides ROI. Even if that means throwing the consumers under the bus in the long run to achieve that.
  - ng12 8y ago
    Yeah but who do you think is pushing the company to bow to the shareholder pressure?
    - rm_-rf_slash 8y ago
      It could very well be the engineers looking to make a lot of money with their stock options after all their hard work.
aetherson 8y ago
If the app cost $1 per year subscription, most people could afford it, but many wouldn't get their shit together and actually do the payment, and then their accounts would be suspended, and the network effect would be reduced. And also, WhatsApp wouldn't be making a ton of money. Payment processors take a huge bite out of $1 payments, the service does cost money to run, and it costs more money to continue to develop. A monetization model that's not a subscription allows very poor people/people who are turned off by putting in a credit card number to stay on the system, while monetizing the majority of users for a much higher per-person value, thus meaning that WhatsApp would take in higher total revenue while maintaining their network effect and ability to appeal to new users. You can see why they want to do the latter.
- bitexploder 8y ago
  Just give subscription users some special features, custom Emoji, or whatever. Seems like it would generate enough revenue to pay the bills, but probably not enough to make a FB type business happy.
- grawprog 8y ago
  I personally would stop using WhatsApp if they charged a subscription for it. I don't use it to talk to a few people. It would be ridiculous to pay money to keep using it. For me at least.
  - SmellyGeekBoy 8y ago
    I'm the complete opposite. I'd pay a lot more than $1 per year if the alternative was targeted ads.
moorhosj 8y ago
==Instead, a bunch of MBAs want to rule the world by focusing on growth at all costs== How does Paul Graham explicitly stating "Startup = Growth" fit into this box? Remind me where Mark Zuckerberg got his MBA.
jklinger410 8y ago
Many great products never get brought to market because of "lack of scale." The second renaissance of this unicorn investment bullshit will be micro-services run by small teams that bootstrap and market there way into profitability instead of asking millionaires to sign them blank checks hoping they will be the next SNAP.
ilovecaching 8y ago
And what about all the small businesses that could grow from providing them an advertising outlet to their customers on WhatsApp? What about countries where it's difficult to make online payments, or credit card fraud is rampant? What about processing fees? What about necessary price fluctuations as the infrastructure grows? What about user growth?
storgendibal 8y ago
Engineer with an MBA here. My two cents: Back when I was writing code, my worldview was that if engineers ran every company, then the world would simply be a better, more rational place. Because engineering is hard and everything else is easy/squishy/learnable. During my b-school classes, it dawned on me that things are much more complicated than I had thought. Marketing and sales are very hard, very quantitative, and can make or break a company. Corporate planning from a cost / revenue perspective is super critical. Steering a large organization and navigating personalities and power structures in such a company is difficult and squishy. Certainly, some MBAs are full of sh but I've also run into plenty of engineers who are full of sh. I think it's hard to stereotype. When I first started business school I thought everyone would be the stereotypical investment banking jerk. Instead, I was pleasantly surprised that most people were fun, very sharp, pleasant, intellectually curious, and they really respected folks with a technical background. Exposure to them broadened my own worldview in a number of different ways. Sure, you don't need an MBA to run a company. But you also don't need a CS degree from MIT to be an awesome engineer.
- boxg 8y ago
  So your response to the argument that MBA's are robots programmed to chase growth at all costs including self is - no no you don't understand what complex problems we solve. This is a well trained robot right here.
- Synroc 8y ago
  I’m curious in your path. What made you decide to get an MBA being an engineer, and what are you doing now with that degree?
  - kumarvvr 8y ago
    This is a very common path taken in India. Engineer > 1 - 4 years experience in IT/Engineering etc > 2 Year MBA from a reputed college > Management role in related or a completely different field. There is a general consensus in India that engineers can be groomed to be good managers. No idea why. One more aspect to consider is that qualifying exams for top-tier MBA colleges in India (IIM's, etc) are somehow cracked more easily by engineers. Of course there are students from commerce / arts / etc that also crack and top these exams, but the trend till date is it's mostly engineers. Also most of the top Indian guys in Silicon Valley (Sundar Pichai, Satya Nadella, etc) have are engineers from some of the top engineering colleges in India.
kikoreis 8y ago
To me there was always a fatal flaw in WhatsApp's original business model, namely, lack of a viable payment method that could scale to the userbase they were targeting. Most people using WhatsApp don't have a credit card. Telcos obviously have a way to charge their customers but beinf an OTT service meant they wouldn't be incentivized to help WhatsApp kill SMS revenue. An exit to FB ended up being the obvious decision.. but it had to be clear at that point that the plan has to be monetize users through ads.
- totalZero 8y ago
  I first started to use WhatsApp at the recommendation of a Paraguayan friend who lives in a small house outside of Asuncion. Her father drives a taxi and she drives a beat up car from the early 1980s. No idea if she paid for the app using a credit card but at least in Latin america, lower middle class people do tend to have access to such payment methods. My understanding has always been that WhatsApp encountered its first and biggest success in the third world, where mobile connections are spotty and average people at the time didnt want to pay for data plans and SMS packages. WhatsApp allowed people to pop into a wifi hotspot to check messages without any fees beyond the $1 for the app.
  - kikoreis 8y ago
    I'm from Latin America, and I can't agree with that: lower middle class people don't tend to have access to credit cards. Besides, even for people who do have credit cards, the friction of using one for payment is non-trivial. The reason everybody uses WhatsApp is that they never paid for it -- in fact neither I nor anybody I asked can actually recall ever seeing payment UX on the app.
    - elboru 8y ago
      Agree, I'm from Mexico and over here Uber had to change their payments methods. They started allowing cash payments to prevent missing a good portion of the market. And yes, I've used WhatsApp since the early years and I never paid for it, actually I don't even remember WhatsApp being insistent about it.
downandout 8y ago
Nearly all users got in during "free for life" periods. Whatsapp was never making anywhere near $1/user/yr. To give you an idea of just how few users were paying, in the first half of 2014, they had 450 million users and generated only $15 million of revenue [1]. Even if you annualized that to $30 million, that means about 6.7% of users were ever paying a fee to use it. [1] http://time.com/3545911/facebook-whatsapp-earnings/ http://time.com/3545911/facebook-whatsapp-earnings/
1k 8y ago
IIRC for me it was a one time fee of 1 USD. They implemented this fee whenever they were growing too fast and needed to slow they growth to keep their servers in check. At other times it was free.
cstrat 8y ago
I have had whatsapp for years (well prior to the FB acquisition) and have never paid for a subscription. I might have paid $1 originally (don't remember). Subscription payments for apps wasn't a thing back then on iOS.
akchin 8y ago
I don’t understand the MBA hate here. The WhatsApp founders don’t have MBAs and sold their company to Facebook for 19 billion. They wanted to be that rich. Nothing to do with MBAs. Also let us be clear. Engineers are no saints either. Case in point Anthony Levandowski of Otto. Orchestrating one of the shadiest acquisitions to make a quick buck. Folks have pointed out below that the issue of growth is not necessarily an mba or maximizing shareholder thing. In some competitive environments if you don’t do it, you will die. That said one can always do what DHH did with 37 signals...that was a specific choice. Nothing to do with having an mba or not. One has to look at things with nuance, not just be black and white.
- yalph 8y ago
  Hold on what is being discussed here has nothing to do with how you sell your business or for how much. We are talking about how loyal customers are treated by business/business people. Whatsapp was sold for that much because many other companies were willing to buy for similiar amounts.
  - akchin 8y ago
    The comment was about how WhatsApp was good with the model they had before facebook’s acquisition and how now the model to make money is because of mbas. That is what I am commenting on. It is as if MBAs are the reason Facebook is trying to monetize WhatsApp in a different way.
Eridrus 8y ago
> I wish more companies were like Craigslist - happy to make an great profit and a lasting business I'm not really sure Craigslist is a good model here, I feel like their business is getting taken apart vertical by vertical as they fail to keep improving.
pmontra 8y ago
They didn't enforce payments. I remember they asked me money but the app still worked when I didn't pay. I was surprised, so when they asked me money again many months later I didn't pay again to see what happened. The app kept working. Months later they asked me money again and this time the app stopped working. But back then whatsapp was not as popular as it is now. I was still using SMSes with most of my contacts (my plan had more free SMSes than I needed) and Viber was at least as popular as Whatsapp and I remember that I was using at least another two or three instant messengers with different people. So I didn't pay and I waited to see what happened. The other messengers where free. After a couple of days whatsapp started to work again. So it was official, they bluffed about payment and I knew that I could ignore their future requests. They cared about growing and not about being profitable. The $1 per year business model wasn't for real. My guess is that if they enforced payments there wouldn't be any whatsapp now. We would be writing about one of their free competitors from that time now.
- icebraining 8y ago
  I wonder how many people paid anyway. Maybe their tactics would get enough payers to support the whole thing.
  - sah2ed 8y ago
    Here is Jan Koum, at Startup School SV 2014 [0]: "... our iPhone app was paid and our other platforms were free." Other platforms being Nokia and Blackberry. He further explained that it may sound somewhat counter-intuitive: the reason why they made the app paid for some users was to slow their growth (similar to Facebook's college-only focus) so they could properly build out infrastructure and improve on the user-experience [1]. [0] https://genius.com/Jim-goetz-jim-goetz-and-jan-koum-at-startup-school-sv-2014-annotated https://genius.com/Jim-goetz-jim-goetz-and-jan-koum-at-start... [1] https://youtu.be/8-pJa11YvCs?list=PLQ-uHSnFig5OyY5JWSQrl_gESiEUJxe1m&t=963 https://youtu.be/8-pJa11YvCs?list=PLQ-uHSnFig5OyY5JWSQrl_gES...
- blub 8y ago
  This type of customer behaviour explains why "grab the customer by the balls" is such a popular business plan. In the end customers are screwing themselves big time if they don't want to pay €. Software doesn't grow in trees.
textmode 8y ago
In an interview a number of years ago, one of the founders of WhatsApp said the $1 fee was actually not a business model. I believe the interview is on YouTube. He said he instituted the $1 fee to try to slow down a relentless increase in new users because he was afraid of potential outages.
dalbasal 8y ago
>>It doesn't cost them $100M a month to provide the service. This isn't that much of a factor. FB paid $19bn for Whatsapp. A small profit on a $100m or $500m revenue base is never going to justify even a fraction of that acqisition price. FB sort of set this standard themselves. They didn't pay attention to revenue early, as the movie said: A million dollars isn't cool. A billion users is cool. At IPO-time, those billion users still didn't ad up to revenue. This is much later than google, who had a mature business model much earlier. Then, FB actually did find a formula to turn their 2 bn free users into a revneue stream. They proved it can be done. Putting on the ruthless analyst hat... There are two reasons for the whatsapp bidding war: (1) keep it from the competition (2) potentially turn 2bn users into >$2bn revenue. FB already achieved no. 1. The ruthless business thing to do would be to force whatsapp to bet the house on achieving no. 2.

SamUK96 8y ago

How else is someone with an MBA going to make their qualification look like it means something? It's similar to marketing in many large companies for example, anyone will tell you that most of what marketing does benefits precisely no-one. Users get pissed off about adtech et al - but those "extra 5000 clicks per month!" sound really good in a meeting and without any context regarding sales and PR, etc...

wlesieutre 8y ago

Glossing over the fact that they probably wouldn't have all of those 1.5 billion users if it had stayed a paid service. Even at $1, having to pay money pushes people off to other free platforms.

pmlnr 8y ago
So? It would still be profitable. Not everyone has to use the same thing.
- sushid 8y ago
  Sure but it will start to erode its market share as other companies offer similar but free products. And a mobile messaging company relies on the network effect to stay relevant and popular.
- pmontra 8y ago
  One of their free competitors would have grown to 1.5 billion users and whatsapp wouldn't be able to charge money for the same product. They would have had to pivot to something people would pay for or close or sell for a much smaller amount. They could try charging $1 per year now and see what happens. Probably a flood mainly to Facebook Messenger and in part to other apps.
reitanqild 8y ago
Maybe not all those users but they where growing really fast despite announcing their business model loud and clear, - I'd say even to some degree because they were loud and clear about their business model: selling a great service.
jethro_tell 8y ago
You, could do tiered models as well. At a billion users they were running 11 servers. Free with ads and data sharing, .25 targeted ads no data sharing, .50 geolocated ads only. $1 privacy + the standard. 1.50 premium extra storage or w/e
- sushid 8y ago
  The jump from free to $0.25 is the biggest hurdle of all. Right now, you basically don't need a payment form connected to your account to use Whatsapp. But you do with $0.25. The tiers you suggest don't affect any layperson (would your grandmother even know what geolocated ads are? Would she care?). If anything, it sounds alarming to a layperson to even have these options. IMO your comment is a clear example of why technical people should not always be the product decision makers.
- Thiez 8y ago
  Those tiers wouldn't fly under the GDPR, at least not the free one.
vesak 8y ago
People are so mindbogglingly stupid that it hurts. Every user of these so-called free platforms pay way more than $1 yearly for using them, via products they have been pushed and attention they have lost. If you're a potential high-wage earner, you're paying more than that in an hour!

xkjkls 8y ago

How many of their current users would actually be paying $1 a year? Over the long term how many more? Most of these products want to be free. If I'm paying $1 a year to WhatsApp and see my friend using a different app without being charged for it, I feel like I'm getting screwed. I find it hard to think of WhatsApp truly being a long term product with that business model. Two, claiming encouraging more ads on your platform is "squeezing locked in users for every dime possible" is only half of the equation. Have you ever talked to a business that relies on Facebook and Instagram ads? They're enormously grateful they exist. Without them hundreds of thousands of businesses would not be possible. That shouldn't be thrown aside as worthless.

iraphael 8y ago
The power of mass usage comes into play here. IIRC, when WhatsApp launched, I was one of the early adopters. As it grew (and it became hugely popular in Brazil, where I lived) they switched to the $1/year model. Current users were auto-enrolled in a "free-for-life" plan. My friends who didn't have WhatApp would still sign up because everyone else was using it and, besides "$1/year? it's almost nothing".
- balls187 8y ago
  Was it 1 Brazillian Real or 1 USD? In many countries, WhatsApp is the defacto communication platform for businesses to communicate with customers.
  - iraphael 8y ago
    I don't actually remember. I used to set all my settings to US/American ones because some apps were only in the US app store, so there's a good chance I was looking at the US$1 price. Not sure what my friends saw in the Brazilian app store.
    - kawera 8y ago
      It was the equivalent of US$1 in reais.

kosei 8y ago

The vast majority of customers would switch off Whatsapp to free competitors if the service had a price. If more companies go this path, sure, but the market has shown so far that people are willing to put up with ads in exchange for not paying money. We see this in pretty much every industry from TV to online content. Whatsapp does not have enough of a competitive advantage to charge a premium and hope to keep its customer base.

wolco 8y ago
I would rarely use a product I needed to pay for. On the other hand the products I pay for I usualu get more enjoyment and/or more productivity. If I was using it and the price went to a dollar I would probably continue.

Smirnoff 8y ago

Ok, I agree that some MBAs can be full of it but can we already stop this MBA hate on HN? I feel like lots of people here think that if you build something then customers will surely come. I've got a huge surprise for you. You will have to sell your product and some of the MBA's are really great at that. In B2B a single sale can make or break your company when you're low on cash. You do your job and let them do theirs. You code, talk to users, ship, and iterate. They handle sales, operations, marketing, and maybe fundraising. These other things can be done by a technical founder but they are not fun. There is a reason why some companies hire COOs so that CEOs can focus on their job. Finally, it's not MBAs who decided to focus on growth at all costs. It's the nature of the game. Either you get to the top or your competitors will do that. So don't hate the player, hate the game.

oculusthrift 8y ago
eh why feel bad for mba’s? some of the highest paid most privileged people in the world
ythn 8y ago
From my perspective, any company that goes public will eventually turn to crap (or go through decades-long crap/good cycles). It's not MBAs that drive for growth at all costs - I would argue it's shareholders. Shareholders are greedy and don't care about anything else besides ROI. Even if that means throwing the consumers under the bus in the long run to achieve that.
- ng12 8y ago
  Yeah but who do you think is pushing the company to bow to the shareholder pressure?
  - rm_-rf_slash 8y ago
    It could very well be the engineers looking to make a lot of money with their stock options after all their hard work.

aetherson 8y ago

If the app cost $1 per year subscription, most people could afford it, but many wouldn't get their shit together and actually do the payment, and then their accounts would be suspended, and the network effect would be reduced. And also, WhatsApp wouldn't be making a ton of money. Payment processors take a huge bite out of $1 payments, the service does cost money to run, and it costs more money to continue to develop. A monetization model that's not a subscription allows very poor people/people who are turned off by putting in a credit card number to stay on the system, while monetizing the majority of users for a much higher per-person value, thus meaning that WhatsApp would take in higher total revenue while maintaining their network effect and ability to appeal to new users. You can see why they want to do the latter.

bitexploder 8y ago
Just give subscription users some special features, custom Emoji, or whatever. Seems like it would generate enough revenue to pay the bills, but probably not enough to make a FB type business happy.
grawprog 8y ago
I personally would stop using WhatsApp if they charged a subscription for it. I don't use it to talk to a few people. It would be ridiculous to pay money to keep using it. For me at least.
- SmellyGeekBoy 8y ago
  I'm the complete opposite. I'd pay a lot more than $1 per year if the alternative was targeted ads.

moorhosj 8y ago

==Instead, a bunch of MBAs want to rule the world by focusing on growth at all costs== How does Paul Graham explicitly stating "Startup = Growth" fit into this box? Remind me where Mark Zuckerberg got his MBA.

jklinger410 8y ago

Many great products never get brought to market because of "lack of scale." The second renaissance of this unicorn investment bullshit will be micro-services run by small teams that bootstrap and market there way into profitability instead of asking millionaires to sign them blank checks hoping they will be the next SNAP.

ilovecaching 8y ago

And what about all the small businesses that could grow from providing them an advertising outlet to their customers on WhatsApp? What about countries where it's difficult to make online payments, or credit card fraud is rampant? What about processing fees? What about necessary price fluctuations as the infrastructure grows? What about user growth?

storgendibal 8y ago

Engineer with an MBA here. My two cents: Back when I was writing code, my worldview was that if engineers ran every company, then the world would simply be a better, more rational place. Because engineering is hard and everything else is easy/squishy/learnable. During my b-school classes, it dawned on me that things are much more complicated than I had thought. Marketing and sales are very hard, very quantitative, and can make or break a company. Corporate planning from a cost / revenue perspective is super critical. Steering a large organization and navigating personalities and power structures in such a company is difficult and squishy. Certainly, some MBAs are full of sh but I've also run into plenty of engineers who are full of sh. I think it's hard to stereotype. When I first started business school I thought everyone would be the stereotypical investment banking jerk. Instead, I was pleasantly surprised that most people were fun, very sharp, pleasant, intellectually curious, and they really respected folks with a technical background. Exposure to them broadened my own worldview in a number of different ways. Sure, you don't need an MBA to run a company. But you also don't need a CS degree from MIT to be an awesome engineer.

boxg 8y ago
So your response to the argument that MBA's are robots programmed to chase growth at all costs including self is - no no you don't understand what complex problems we solve. This is a well trained robot right here.
Synroc 8y ago
I’m curious in your path. What made you decide to get an MBA being an engineer, and what are you doing now with that degree?
- kumarvvr 8y ago
  This is a very common path taken in India. Engineer > 1 - 4 years experience in IT/Engineering etc > 2 Year MBA from a reputed college > Management role in related or a completely different field. There is a general consensus in India that engineers can be groomed to be good managers. No idea why. One more aspect to consider is that qualifying exams for top-tier MBA colleges in India (IIM's, etc) are somehow cracked more easily by engineers. Of course there are students from commerce / arts / etc that also crack and top these exams, but the trend till date is it's mostly engineers. Also most of the top Indian guys in Silicon Valley (Sundar Pichai, Satya Nadella, etc) have are engineers from some of the top engineering colleges in India.

kikoreis 8y ago

To me there was always a fatal flaw in WhatsApp's original business model, namely, lack of a viable payment method that could scale to the userbase they were targeting. Most people using WhatsApp don't have a credit card. Telcos obviously have a way to charge their customers but beinf an OTT service meant they wouldn't be incentivized to help WhatsApp kill SMS revenue. An exit to FB ended up being the obvious decision.. but it had to be clear at that point that the plan has to be monetize users through ads.

totalZero 8y ago
I first started to use WhatsApp at the recommendation of a Paraguayan friend who lives in a small house outside of Asuncion. Her father drives a taxi and she drives a beat up car from the early 1980s. No idea if she paid for the app using a credit card but at least in Latin america, lower middle class people do tend to have access to such payment methods. My understanding has always been that WhatsApp encountered its first and biggest success in the third world, where mobile connections are spotty and average people at the time didnt want to pay for data plans and SMS packages. WhatsApp allowed people to pop into a wifi hotspot to check messages without any fees beyond the $1 for the app.
- kikoreis 8y ago
  I'm from Latin America, and I can't agree with that: lower middle class people don't tend to have access to credit cards. Besides, even for people who do have credit cards, the friction of using one for payment is non-trivial. The reason everybody uses WhatsApp is that they never paid for it -- in fact neither I nor anybody I asked can actually recall ever seeing payment UX on the app.
  - elboru 8y ago
    Agree, I'm from Mexico and over here Uber had to change their payments methods. They started allowing cash payments to prevent missing a good portion of the market. And yes, I've used WhatsApp since the early years and I never paid for it, actually I don't even remember WhatsApp being insistent about it.

downandout 8y ago

Nearly all users got in during "free for life" periods. Whatsapp was never making anywhere near $1/user/yr. To give you an idea of just how few users were paying, in the first half of 2014, they had 450 million users and generated only $15 million of revenue [1]. Even if you annualized that to $30 million, that means about 6.7% of users were ever paying a fee to use it. [1] http://time.com/3545911/facebook-whatsapp-earnings/ http://time.com/3545911/facebook-whatsapp-earnings/

1k 8y ago

IIRC for me it was a one time fee of 1 USD. They implemented this fee whenever they were growing too fast and needed to slow they growth to keep their servers in check. At other times it was free.

cstrat 8y ago

I have had whatsapp for years (well prior to the FB acquisition) and have never paid for a subscription. I might have paid $1 originally (don't remember). Subscription payments for apps wasn't a thing back then on iOS.

akchin 8y ago

I don’t understand the MBA hate here. The WhatsApp founders don’t have MBAs and sold their company to Facebook for 19 billion. They wanted to be that rich. Nothing to do with MBAs. Also let us be clear. Engineers are no saints either. Case in point Anthony Levandowski of Otto. Orchestrating one of the shadiest acquisitions to make a quick buck. Folks have pointed out below that the issue of growth is not necessarily an mba or maximizing shareholder thing. In some competitive environments if you don’t do it, you will die. That said one can always do what DHH did with 37 signals...that was a specific choice. Nothing to do with having an mba or not. One has to look at things with nuance, not just be black and white.

yalph 8y ago
Hold on what is being discussed here has nothing to do with how you sell your business or for how much. We are talking about how loyal customers are treated by business/business people. Whatsapp was sold for that much because many other companies were willing to buy for similiar amounts.
- akchin 8y ago
  The comment was about how WhatsApp was good with the model they had before facebook’s acquisition and how now the model to make money is because of mbas. That is what I am commenting on. It is as if MBAs are the reason Facebook is trying to monetize WhatsApp in a different way.

Eridrus 8y ago

> I wish more companies were like Craigslist - happy to make an great profit and a lasting business I'm not really sure Craigslist is a good model here, I feel like their business is getting taken apart vertical by vertical as they fail to keep improving.

pmontra 8y ago

They didn't enforce payments. I remember they asked me money but the app still worked when I didn't pay. I was surprised, so when they asked me money again many months later I didn't pay again to see what happened. The app kept working. Months later they asked me money again and this time the app stopped working. But back then whatsapp was not as popular as it is now. I was still using SMSes with most of my contacts (my plan had more free SMSes than I needed) and Viber was at least as popular as Whatsapp and I remember that I was using at least another two or three instant messengers with different people. So I didn't pay and I waited to see what happened. The other messengers where free. After a couple of days whatsapp started to work again. So it was official, they bluffed about payment and I knew that I could ignore their future requests. They cared about growing and not about being profitable. The $1 per year business model wasn't for real. My guess is that if they enforced payments there wouldn't be any whatsapp now. We would be writing about one of their free competitors from that time now.

icebraining 8y ago
I wonder how many people paid anyway. Maybe their tactics would get enough payers to support the whole thing.
- sah2ed 8y ago
  Here is Jan Koum, at Startup School SV 2014 [0]: "... our iPhone app was paid and our other platforms were free." Other platforms being Nokia and Blackberry. He further explained that it may sound somewhat counter-intuitive: the reason why they made the app paid for some users was to slow their growth (similar to Facebook's college-only focus) so they could properly build out infrastructure and improve on the user-experience [1]. [0] https://genius.com/Jim-goetz-jim-goetz-and-jan-koum-at-startup-school-sv-2014-annotated https://genius.com/Jim-goetz-jim-goetz-and-jan-koum-at-start... [1] https://youtu.be/8-pJa11YvCs?list=PLQ-uHSnFig5OyY5JWSQrl_gESiEUJxe1m&t=963 https://youtu.be/8-pJa11YvCs?list=PLQ-uHSnFig5OyY5JWSQrl_gES...
blub 8y ago
This type of customer behaviour explains why "grab the customer by the balls" is such a popular business plan. In the end customers are screwing themselves big time if they don't want to pay €. Software doesn't grow in trees.

textmode 8y ago

In an interview a number of years ago, one of the founders of WhatsApp said the $1 fee was actually not a business model. I believe the interview is on YouTube. He said he instituted the $1 fee to try to slow down a relentless increase in new users because he was afraid of potential outages.

dalbasal 8y ago

>>It doesn't cost them $100M a month to provide the service. This isn't that much of a factor. FB paid $19bn for Whatsapp. A small profit on a $100m or $500m revenue base is never going to justify even a fraction of that acqisition price. FB sort of set this standard themselves. They didn't pay attention to revenue early, as the movie said: A million dollars isn't cool. A billion users is cool. At IPO-time, those billion users still didn't ad up to revenue. This is much later than google, who had a mature business model much earlier. Then, FB actually did find a formula to turn their 2 bn free users into a revneue stream. They proved it can be done. Putting on the ruthless analyst hat... There are two reasons for the whatsapp bidding war: (1) keep it from the competition (2) potentially turn 2bn users into >$2bn revenue. FB already achieved no. 1. The ruthless business thing to do would be to force whatsapp to bet the house on achieving no. 2.