Over the past four years, I have grown really fond of WhatsApp. It is a wonderful application that offers a simple interface, is ad-free and is extremely easy to install, so much that I could really teach my mother and grandparents to use WhatsApp in 5 minutes. At the same time the notifications are very subtle unlike some of the other apps such as, Groupme. WhatsApp has also been making critical updates such as receipt updates with two blue ticks and voice calls over internet that gained widespread acceptance, thereby increasing its monthly active user base to 1 billion accounting for 42 billion messages per day by Feb 2016. In contrast, Twitter has only 300M monthly active users, Facebook messenger has 700M active users and Facebook has only recently crossed 1B daily active users. Further, applications such WhatsApp are driven by network externalities, where the application become more useful by having more users.
Despite its stellar success in increasing its user base, WhatsApp has had limited success in developing a viable business model. It began charging a meek subscription fee of $1 per year and yes, I was one of those ardent fans to pay the amount (thought I want my dollar back now). But even with this moderate fee, not every user is willing to pay and the company generated only $20M in revenues in 2015, i.e. 2% of its user base paid the subscription fee. The revenues were barely able to cover the costs of developing and sustaining WhatsApp. It is clear that this is an unstainable model let alone being a model for growth.
If WhatsApp wants to continue growing its user base and yet generate a sustainable business model then it has to rightly shun its subscription fee model and begin catering to business segment, which has the spending power. In fact, forecast by Gartner suggests that enterprise spend on application software is expected to grow to $201B by 2020 from $140B in 2015 and WhatsApp can make more money, nearly $140M, by capturing 0.1% of the overall market than it would otherwise.
WhatsApp should consider catering to both B2C and B2B businesses and has various service options to offer for the business segment.
- Customer feedback
- Customer assistance
- Real time support
- Team communication and coordination
Companies such as WeChat have already started capturing this market in Asia and WhatsApp still has a long way to go. So, if WhatsApp wants to get a piece of the pie, it better start rolling out these services quickly.