File photo: AFP
File photo: AFP

WhatsApp ditches subscription fee

By Hayley Tsukayama Time of article published Jan 20, 2016

Share this article:


WhatsApp has announced that it's ditching its annual $1 subscription, but promised there's definitely one way it won't make up for its lost revenue: advertising.

In a blog post this week, WhatsApp said it will stop charging for its product over the next several weeks and will make its money instead by partnering with companies to send customer-service-type messages to its users. It will still share your data with other companies but not for traditional advertisements.

“Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from,” the company said in a blog post. “That could mean communicating with your bank about whether a recent transaction was fraudulent, or with an airline about a delayed flight.”

WhatsApp works with several phone platforms – as in, not just iOS and Android – that may make it ideal for reaching customers from a number of companies. And its strength internationally in places such as India and Brazil complements Facebook's strength in the United States.

WhatsApp said in its blog post that the shift was prompted when it realized many people found the subscription a barrier to using the service, even at such a low price. “As we've grown, we've found that this approach hasn't worked well,” the post said. “Many WhatsApp users don't have a debit or credit card number and they worried they'd lose access to their friends and family after their first year.”

Facebook bought WhatsApp, which is reported to have nearly 1 billion users, in 2014. At the time the deal was announced, the price tag for the firm was $19 billion; as Facebook's stock appreciated, it ended up being more like $22 billion. But some analysts have questioned how much value WhatsApp adds to Facebook, which has its own popular messaging service.

Snapchat chief executive “Jan Koum may be able to get enterprises to pay something to use WhatsApp as a channel to reach their customers but it is unlikely he will ever be able to make enough to justify the US$22bn that Facebook paid for the company,” Edison Investment Research analyst Richard Wilson said in a note to investors. “This is because WhatsApp is still adamant that it will continue to operate independently from Facebook,” he said, adding that he believes Facebook would get more value from the service if it integrated it into its own operations.

Yet Mark Zuckerberg, Facebook's chief executive, has said repeatedly that the parent company has no interest in merging WhatsApp with its own Facebook Messenger. In fact, since WhatsApp's acquisition, Facebook has promised that it would continue to operate independently.

The moves from WhatsApp follow what other companies in the highly competitive social messaging space have already taken to move beyond their core function of sending messages. Line, which is particularly popular in Japan, has found great success by branching into gaming. WeChat, developed by Tencent in China, has started programs to let users connect to city services and hospitals through its app; China Daily has reported that the app has even been used by judges in China to conduct trials. Facebook Messenger itself has also been integrated into other companies' services to let users interact with outside firms - you can use it to hail a ride from Uber, for example. – Washington Post

Share this article: