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Do Words Match Deeds for WhatsApp CEO?

The views expressed are those of the author and are not necessarily those of Scientific American.

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Image courtesy of WhatsApp.

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.

Larry Greenemeier About the Author: Larry Greenemeier is the associate editor of technology for Scientific American, covering a variety of tech-related topics, including biotech, computers, military tech, nanotech and robots. Follow on Twitter @lggreenemeier.

The views expressed are those of the author and are not necessarily those of Scientific American.

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  1. 1. tuned 9:09 am 02/22/2014

    To the point:
    No one pays for my bandwidth but me.
    Advertisers, etc. have NO right to take up my time and my bandwidth. This is not “over the air” TV or radio or even free Wi-Fi.

    Link to this
  2. 2. 2:48 pm 02/24/2014

    If it looks like a bubble and floats like a bubble more likely than not it is a bubble. The tech bubble is going to burst soon, and a 55 person firm like WhatsApp being worth more than Alcoa, Southwest Airlines or Harley Davidson is proof of that.

    Link to this
  3. 3. jh6027 3:42 pm 02/24/2014

    Given this weekends extended Whatsapp outage I’m pretty sure it’s a safe bet our data isn’t so anonymous anymore. After all many people have been foolish enough to give Face Book their cell numbers. They can easily connect the dots. Whatsapp might never push any adds and they might not even know who is sending what, but you can be sure Facebook will mine this app for every bit of your personal data that it can get.

    Link to this
  4. 4. 13inches 9:57 pm 02/24/2014

    jh6027: I agree. Facebook has become the NSA of the corporate world. The Facebook CEO is on videotape discussing how he has NO idea why millions of Facebook users willingly give him their names and addresses and phone numbers and photographs and even much more personal information every day, and he stated Facebook will certainly sell and re-sell this information to the highest bidders. Whatsapp has now crossed over to the Satanic Facebook dark side due to the $19 Billion payoff. Hopefully a new free texting app can now evolve and users can abandon the evil Facebook and Whatsapp for a new and more ethical service.

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  5. 5. Auxaitartas 5:17 am 02/25/2014

    No business without benefits. Perhaps we should be less radical and understand that a company must make a profit. Always within the law. We are getting used to getting everything for free. A small contribution for good service, for example see a little advertising, is not abusive. Somehow they have to pay their bills. But I insist. Always within the law and common sense.

    Tartas Madrid

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  6. 6. Jerzy v. 3.0. 6:39 am 02/25/2014

    So, can anybody advise next WhatsApp? Best would be some open-source, decentralized software, which is independent from any central server – which Facebook can buy next.

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  7. 7. jh6027 10:58 am 02/25/2014

    @Auxaitartas- I kind of agree with you. I have an unlimited plan on my phone so I could happily ignore an add or two. But I can also see why people with bandwidth limited plans wouldn’t want to essentially pay to receive advertisements. Especially if they have no choice in the mater.

    But really with 450 million subscribers Whatsapp wasn’t really in financial trouble. Even if the cost was only about a dollar a year. I’d have happily payed five or even ten dollars a year..a dollar a month. They had a great business model and it was working. Sorry to say it seems they just sold out for the big payoff. :(

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  8. 8. riograndedan 1:37 pm 02/25/2014

    Koum is laffin all the way to the bank? beach? bar? boardroom? Bahamas? Bali? Barbados? anywhere he goes.

    Link to this
  9. 9. hkraznodar 3:09 pm 02/28/2014

    @tuned – you pay for the bandwidth but unless you are on a subscription site that you pay for, you are getting the content free. For free content you are essentially agreeing that you will view advertising and your personal info is available for that site to sell. I personally block all adservers but allow advertisements hosted by the actual site (since they tend to be integrated text or image anyway).

    Link to this

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