Monday 24 October 2016

Whatsapp is Facebook's not-so-secret weapon for world domination

Published 05/02/2016 | 09:43

Mark Zuckerberg, chief executive officer of Facebook. Photo: Bloomberg
Mark Zuckerberg, chief executive officer of Facebook. Photo: Bloomberg

If someone told me an upstart would threaten to eclipse Facebook in a few years, I would have scoffed. Now seven-year-old WhatsApp has 1 billion monthly active users while Facebook’s own chat app Messenger only has 800m, and rival Google’s email service – which is four years older than Whatsapp – just hit a billion this year.

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This means 1 in 7 people on Earth use WhatsApp every month, making it arguably the second-most used app on the planet after its parent, Facebook. At its current rate of growth, WhatsApp will have 2bn users by 2020, who send 30 billion messages through the service every day.

When Facebook bought Jan Koum’s app for what was then $19 billion (£12.5bn), it seemed a hefty price tag for an app that made no money (and still doesn’t). WhatsApp was explosively popular though, making it a major rival to Facebook’s own messaging products, so many speculated that the acquisition was made out of fear, and it would ultimately be folded into Messenger. This will never happen. WhatsApp is Facebook’s key to dominating the rest of the world. 

It’s hard to imagine what Facebook still has left to conquer. With roughly 1.5bn users, it’s already got a global footprint. In fact, a study found that 1 in 10 Facebook users in Indonesia and Nigeria didn’t know they were using the internet – for them Facebook was the internet. But in countries like Russia and Japan, strong local players like Vkontakte or Line win out over Facebook consistently, while China’s Tencent enjoys total dominance because of government censorship. In countries like India and Brazil, most of the population is still using feature phones, without internet connectivity. The next billion people who come online will do so from the developing world, on cheap smartphones with spotty connectivity. Facebook wants to reach them all.

Zuckerberg’s plan for global domination has been clear since 2013 when he launched, his plan to connect the whole world to the internet – via Facebook of course. As part of this initiative, Facebook has announced plans for internet-beaming drones for rural and developing areas, and satellites that could cover internet blind spots around the world. Facebook itself is now being designed to accommodate new geographies – an internal program called “2G Tuesdays” simulates slow internet connections in the Californian headquarters, so Facebook engineers can experience how people in non-Western countries use Facebook. A newly developed ad format called “Slideshow” allows advertisers to show a carousel of pictures, rather than data-heavy video ads.

One of the social network’s most controversial programs for global connectivity is Free Basics, a tie-up with local telecoms companies that gives people in 37 developing countries free internet access to a limited number of websites and apps, including Facebook. The program has been met with zealous opposition from the start. Regulators in India are attempting to ban it completely this week, while dozens of digital rights groups from Uganda, Ecuador and Indonesia have protested the plans, saying it threatens net neutrality. But Facebook has spent considerable effort and resource fighting back, taking out full page ads and billboards around Indian cities such as Mumbai, asking: “Who could possibly be against this?” Clearly, they are not willing to back down quietly. This is where WhatsApp comes in.

David Marcus, boss of sister-app Messenger insisted in a recent interview with the Telegraph that the two chat apps were “not competitive” because each one is a preferred platform in different countries. This is WhatsApp’s single biggest value to Facebook. Broadly speaking, Messenger is more popular in Western countries, particularly the United States, where the the market is almost fully saturated. Meanwhile WhatsApp is used by everybody else.

According to AppAnnie, WhatsApp is the leading messaging app in large swathes of Latin America – 100m people use it in Brazil alone, Mark Zuckerberg has said. In countries such as India, Malaysia and South Africa, over 70pc of mobile users are WhatsApp users. The popularity of WhatsApp in Russia in particular could hugely boost Facebook’s penetration in one of Europe’s fastest-growing internet populations.

WhatsApp is the trusted, unthreatening face of Facebook’s long-term plan to connect the world. It already comes pre-loaded on new feature phones in the developing world, where the smartphone market is still nascent. If Free Basics is banned in India, WhatsApp will be the gateway app bringing new internet users in the subcontinent straight to Facebook.

The raging debate around WhatsApp has always been its business model. How does it earn its keep? It started off free, and then added a 99c annual subscription fee for new users. Last week, it ditched the fee again, closing down its meagre revenue channel. Founder Jan Koum reasoned that the WhatsApp target population came from countries where cash is still king – many don’t have credit cards or online banking, making it technically difficult for them to pay. Instead, WhatsApp says it will go the way of its sister-app Messenger, charging brands to talk to their customers instantly.

The model for this “app-as-platform” service is Chinese messenger WeChat. It boasts 600m monthly active users who use the app as a filter for the mobile web: you can hail taxis, book doctors’ appointments, do your grocery shopping or pay your utility bill, all through WeChat.

If WhatsApp is able to become the reigning mobile platform like WeChat in geographies as diverse as India, Brazil and South Africa, that is how it will prove its worth. By 2020, it could deliver Facebook its next billion users on a platter.

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