When people talk of ‘the next Facebook’, then the name at the front of most technology people’s minds is WhatsApp Messenger. That in turn has caused a huge amount of interest in the proprietary messaging service, prompting us to feature it as the latest mobile app in our ‘how to make an app’ series.
Whatsapp is a proprietary, cross-platform instant messaging subscription service for smartphones connected to the internet. In addition to text (SMS) messaging, users are able to send each other photos, videos and audio media messages.
Having started on iOS, the app is now available on Google’s Android, Blackberry, Nokia, Windows Phone as well as Apple’s iOS.
In the world of mobile apps, Whatsapp is one of the most mature participants having been founded in 2009 (a year after Apple’s App Store opened) by 2 former Yahoo engineers, American Brian Acton and Ukrainian Jan Koum (also CEO). It’s based in Silicon Valley.
Whilst 5 years old, the app has enjoyed its most spectacular growth over the last 2 years. In April 2012, the company reported that its users were sending 2 billion messages a day – that had grown 5 fold to 10 billion messages by October 2012, and over 13 fold to 27 billion messages a day by June 2013. This prompted the Financial Times to say that Whatsapp “has done to SMS on mobile phones what Skype did to international calling on landlines”.
Most impressively of all, in December 2013 Whatsapp claimed to have over 400 million active users using the service each month – making its user base about a third the size of Facebook’s.
The business model
The traditional business model of social networks has been advertising – be that Friendster or MySpace, or today with Facebook and Twitter. However, the Founders of Whatsapp had as part of their core motivation, a desire to escape this cycle:
“When we sat down to start our own thing together three years ago we wanted to make something that wasn’t just another ad clearinghouse. We wanted to spend time building a service people wanted to use because it worked and saved them money and made their lives better in a small way. We knew that we could charge people directly if we could do all those things. We knew we could do what most people aim to do everyday: avoid ads.”
So what did they come up with in advertising place? Well, initially the app provided such a great way for its users to escape SMS charging, particularly when ‘roaming’ outside of their home nation – particularly a pain point in Geographically compressed Europe – that they were able to charge $2.99 a download.
That’s right – this is an app that originally had a pay-per-download business model – and wasn’t simply free! Nowadays, Whatsapp’s business model for new users is subscription based – the app is Free to download and use for the first year, after which new users have to pay 99 cents for each additional year they remain a user. This annual fee has not been applied retrospectively however, so early users can continue to enjoy the benefits of using the app for the original one off cost they paid.
Having a revenue generative business model has and will continue to make it easier for the Founders to retain control of their baby. Unusually for a successful, 5 year old Silicon Valley company, Whasapp has only had one round of outside funding, a Series A round led by Sequoia Capital in April 2011. This means the company is free from a large group of outside investors keen to cash in on their success, by exiting the company in a sale to a Google (a $1 billion offer was rumoured to have been made in 2013) or other trade buyer.
WhatsApp utilises a customised version of the open standard Extensible Messaging and Presence Protocol (XMPP). Upon being downloaded, it creates a user account using the smartphone’ telephone number as username (Jabber ID: [phone number]@s.whatsapp.net). WhatsApp software automatically compares all phone numbers from the smartphone’s address book with its central database of WhatsApp users to automatically add contacts to the user’s WhatsApp contact list. A random password is generated on the server side.
Images and other multimedia messages are sent by uploading the image, audio or video to a HTTP server and then sending a link to the content along with its Base64 encoded thumbnail.
Facebook announced the planned acquisition of Whatsapp on 19 February for a remarkable $16billion in cash and shares, with a further $3billion in shares for employees of Whatsapp which will vest over the next 4 years.
What initially appears a ridiculous value, actually on a per user basis, is remarkably similar to the price Facebook paid for Instagram – $40 v $37.
So, a good idea, well executed and five years later a billion company – it’s these opportunities that prompted us to create our Course teaching non-technical people how to go about turning their app ideas into an app. To learn how to make an app with your own idea, then start on a free trial with the first Course tutorial today.