February 22, 2014 | 9
Before Jan Koum sold his company, WhatsApp, to Facebook for a mind-numbing $19 billion, he had a Post-It note affixed to his desk—put there by WhatsApp co-founder Brian Acton—that set out the company’s philosophy: “No ads, no games, no gimmicks.”
Facebook relies heavily on all three.
The contrast between the business model and philosophy of the fledgling WhatsApp and its new owner is stark. How Koum will rectify this discrepancy will be the subject of great interest over the next few years, as Facebook seeks to get some value out of its considerable investment.
Koum’s outlined his company’s credo last month in an interview he gave at the Digital-Life-Design (DLD) conference in Munich with WIRED U.K. editor David Rowan. [Click here to see the interview.] During their 16-minute conversation Koum repeatedly emphasized his company’s priorities—building a business for the long haul with a laser-like focus on their mobile messaging app, free from advertiser interference that might influence their technology or put customer data at risk.
What a difference a month makes.
Facebook, which announced the acquisition on February 19, is hungry for new revenue streams, particularly in the mobile market. It makes sense that the social network would look to somehow draw revenue from WhatsApp’s nearly 450 million active users, who rely on the messaging app to send text, video and pictures. WhatsApp, however, charges a 99-cent annual subscription fee—waived for the first year—and doesn’t rely on advertising revenue.
Facebook says it plans to allow WhatsApp to continue to operate as mostly an independent company, along the lines of the social network’s relationship with Instagram, which it purchased in 2012 for $1 billion. Koum refers to the deal with Facebook as a “partnership” and insisted in a recent blog post that nothing about his company will change. Still, it’s a remarkable turn of events, given the views Koum expressed during the DLD interview.
“For us, putting advertising on something as personal as your phone and putting advertising in the way of people trying to communicate and wanting to stay in touch and communicate with each other is, in our mind, wrong,” Koum told Rowan. “So we decided to build a product that is built around people actually giving us money. This way we can actually have a relationship with our customers.”
When Rowan asked how much pressure Koum and his colleagues were facing to join up with a company looking to cash in on WhatsApp’s fast growth, Koum actually expressed an interest in following the path taken by Facebook, Google, Yahoo and Twitter—successful one-time tech startups that resisted the urge to sell out to larger businesses. “For us it’s about building a company that’s here to stay for the next 10, 20, 50 years,” he said. Of course, the deal with Facebook doesn’t necessarily preclude this from happening. The question is more of Facebook’s influence on the company that WhatsApp becomes.
The DLD interview also broached the subject of personal information—something Facebook relies on to drive advertising revenue. Koum pointed out that his company doesn’t collect personal information from its customers, it doesn’t know their names, gender or addresses. The only information WhatsApp has from its customers is their phone number and the phone number of a message’s recipient. “The product is built around us knowing as little as possible about the user and what they do on our network,” he said.
Rowan wrapped up the interview by asking the prescient question of whether would consider selling out to a high bidder. Koum responded, “We’re trying to build a company that we can be proud of and not something that is built just to quickly pump and dump.”
There’s nothing to indicate that WhatsApp’s new relationship with Facebook will necessarily change the startup’s DNA. But Koum may have to walk a tightrope to keep the new owner from wanting a fast return on its lavish investment.