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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 ta

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.
ian0 8y ago
It didn't have to get everyone to pay $1 a year. It just had to get enough to pay the rent and know that eventually with improvements in payments it could get most on board a paid plan. I presume thats what they had in mind at the time, the billing was very loose, I cant recall anyone being blocked for not paying, at least here (SEA). And its feasible. Back in the day there were carriers open to chat apps (eg BBM) and google play is one of the first merchants on direct carrier billing, despite every telco trying to control app marketplaces. Fast forward to today and there are dozens of agent networks and wallet platforms for underbanked users and improvements in banking and DCB across the board. They wouldn't have had anywhere near 100% paying customers but entirely possible to get a majority.
- kikoreis 8y ago
  Your post made me wonder whether I'm missing something obvious: what sort of global wallet platforms exist for underbanked users? Credit cards are the only platform I know to work reliably, but most people don't have them, and they are horrible to use online. If you don't have a credit card, what online, global alternatives exist? Paypal I guess, but using it is even harder than using a credit card..
  - ian0 8y ago
    There are no truly global ones yet (though alipay has 500m accounts). Rather a hodgepodge of companies in developing countries have been rolling out their own, with a lot of success in recent years. The first wave was telcos, which largely failed with the exception of a tiny few (eg m-pesa in kenya, globecash in philipenes). Banks entered the frey but struggled. Then the new wave came around, led by Alipay and Wechat. They kick started their wallets by leveraging existing products (ecommerce, chat) before expanding it to point of sale. This model is growing strong (see go-pay, grab-pay, paytm). But the whatsapp problem could have been solved by a far more traditional route. You dont need people to pay on whatsapp, but rather just need the $$ to get to whatsapp. For that type of thing electronic voucher distribution could have been leveraged, in the same way that play, games vouchers, itunes vouchers work. So Whatsapp sell codes at a 5-10% discount to 3 large companies (paid in advance), who then onsell through a network of parties until someone wanders up to a street stall, gives a dollar-equivilent in cash to the owner of the stall and receives their code. The code when entered extends the subscriptions. Everyone in the chain takes a portion of the fee. If your feeling particularly fancy you can replace the entire voucher with a realtime call that activates that persons subscription. But needs to be on a per-country basis.

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.

ian0 8y ago

It didn't have to get everyone to pay $1 a year. It just had to get enough to pay the rent and know that eventually with improvements in payments it could get most on board a paid plan. I presume thats what they had in mind at the time, the billing was very loose, I cant recall anyone being blocked for not paying, at least here (SEA). And its feasible. Back in the day there were carriers open to chat apps (eg BBM) and google play is one of the first merchants on direct carrier billing, despite every telco trying to control app marketplaces. Fast forward to today and there are dozens of agent networks and wallet platforms for underbanked users and improvements in banking and DCB across the board. They wouldn't have had anywhere near 100% paying customers but entirely possible to get a majority.

kikoreis 8y ago
Your post made me wonder whether I'm missing something obvious: what sort of global wallet platforms exist for underbanked users? Credit cards are the only platform I know to work reliably, but most people don't have them, and they are horrible to use online. If you don't have a credit card, what online, global alternatives exist? Paypal I guess, but using it is even harder than using a credit card..
- ian0 8y ago
  There are no truly global ones yet (though alipay has 500m accounts). Rather a hodgepodge of companies in developing countries have been rolling out their own, with a lot of success in recent years. The first wave was telcos, which largely failed with the exception of a tiny few (eg m-pesa in kenya, globecash in philipenes). Banks entered the frey but struggled. Then the new wave came around, led by Alipay and Wechat. They kick started their wallets by leveraging existing products (ecommerce, chat) before expanding it to point of sale. This model is growing strong (see go-pay, grab-pay, paytm). But the whatsapp problem could have been solved by a far more traditional route. You dont need people to pay on whatsapp, but rather just need the $$ to get to whatsapp. For that type of thing electronic voucher distribution could have been leveraged, in the same way that play, games vouchers, itunes vouchers work. So Whatsapp sell codes at a 5-10% discount to 3 large companies (paid in advance), who then onsell through a network of parties until someone wanders up to a street stall, gives a dollar-equivilent in cash to the owner of the stall and receives their code. The code when entered extends the subscriptions. Everyone in the chain takes a portion of the fee. If your feeling particularly fancy you can replace the entire voucher with a realtime call that activates that persons subscription. But needs to be on a per-country basis.