WhatsApp is the no.1 messaging app, followed by Facebook Messenger. Between the two of them, Facebook Inc. controls 79% of the instant messaging market (this number is reported to be as high as 1.5 billion active users as at January, 2016; according to Statista)
It seems that Jan Kuom (WhatsApp cofounder), has been rethinking how WhatsApp will make money for its investors by “copying” WeChat’s monetization playbook.
WhatsApp did not have a real revenue model when it was acquired by Facebook for $19 billion in 2014. From available records, the 2014 Facebook Form 10-Q showed that the nine months preceding September 30, 2014 when Facebook acquired WhatsApp, it had only generated a paltry revenue of $1,289,000. This money was made by charging users an annual fee of $0.99 after the first year. Even this fee was waived to enable the app gain adoption in most markets.
However, with almost 1 billion users, it is time for Facebook/WhatsApp to make their money back.
Thankfully, this has coincided with the emergence of chat app as-a-portal which is already happening with the likes of Facebook Messenger being used to initiate UBER rides and with WeChat that is built primarily to support app-in-app integration. (As I said earlier, this is the new turf that WhatsApp is trying to play on)
Though it is arriving to this party a little late, WhatsApp is better positioned to leverage this opportunity, even ahead of rival chat apps. Already, third-party developers have un-officially been extending their API, making it possible to use WhatsApp as a business and productivity tool.
Their 9th anniversary announcement agrees with the need to position WhatsApp as a business tool and this time WhatsApp is going to do it at a big scale. To do this, they might have to completely re-write some of their codes which might end up not being compatible with some old mobile OSes. That is why the announcement pointed out that they will discontinue support for some platforms namely Windows (7.1 and below), feature phones and Blackberry (including BB10. There was a petition against this already by BB 10 users)
What is the use of backward integration and support for these outdated software when only a tiny percentage of your market is using it?
This is a business decision for WhatsApp and based on this announcement, it is clear that this “lost audience” is only 0.5% of their market share. For an app that has 1 billion active user base, that is 5 million users “only”.
A second look at the “lost” audience: How many users is WhatsApp leaving on the table and what is the opportunity for competitors?
Let’s take scientific calculation of actual number of users WhatsApp is probably leaving on the table.
From a purely smartphone perspective, this is 5 million. However, if you factor in the feature phones, a new reality emerges. In fact, according to Statista, the number of feature phones that is estimated to be shipped post-2016 in Asia/Pacific region for example, is still higher than smartphones.
Another market insight by MobiForge reported that mobile subscriptions market growth is being driven by demand from the developing world, particularly in Africa which has the lowest mobile penetration worldwide at 69.3 percent. So, if you extrapolate that a good number of this subscription could be on feature phones and low-end smartphones, then you can easily understand why a new app should take advantage of this opportunity for good.
In fact, 2Go app was made for this audience in mind.
To be objective, the economic power of this audience might be too low for WhatsApp to worry about, but it could be big enough for someone else. In developing markets across Asia and Africa, where technology is still limited and high-end smartphones are still a luxury, any messaging app that captures this “lost” audience can still reap a massive ROI from the audience leftover from WhatsApp.
Revenue from mobile is still limited but platforms like Eskimi will be happy to ramp up these WhatsApp “crumbs” and monetize them appropriately.
Who knows, if this can become a re-emergence for mXit, 2Go or eSkimi who used to dominate the messaging space in Africa before WhatsApp beat them all to it.
Before writing this piece, I left a comment on an earlier post that sums up my position.
On a final note, I believe that messaging app is about to evolve with an upper tier that requires sophisticated mobile operating system to run it as “king of the North” and a lower tier, that can be bare-bone and own the rest; as “king of the South”. Thanks to WhatsApp for not being selfish 🙂