Internet of Things
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WhatsApp has announced that it is dropping subscription fees as its main revenue model to instead develop tools that will allow its users to communicate with enterprises and other organizations. These tools will form the basis of enterprise-focused revenue-generating services. The move comes just under two years since the announcement of WhatsApp’s acquisition by Facebook, and at a time when the service is very close to reaching 1 billion monthly active users (MAUs).
In some countries WhatsApp charged users a fee of about $0.99 per year after the first year of use. However, the company has conceded that this approach does not work because a high proportion of its users lack debit or credit cards (particularly in emerging markets where the app is popular). Also users expressed concern that they would be cut off from the service after the first year. Even though WhatsApp reportedly took $20m in revenues in 2013, this was from a pool of about 400 million MAUs by year-end (see Ovum’s OTT Communications Tracker: 3Q15). If WhatsApp had been charging all of its users, its revenues could have been ten times as high – and this is allowing for the fact that its MAUs doubled between April and December 2013 and therefore at least half of its users would have still been in their first year of service in 2013.
Initially, Facebook’s acquisition of WhatsApp – which closed for $21.8bn in October 2014 – focused on building WhatsApp’s reach, rather than generating revenues. WhatsApp has definitely succeeded at achieving the former: According to Forbes, WhatsApp CEO Jan Koum told the DLD Conference in Munich that the service had 990 million MAUs as of January 2016.
The company is now turning its attention towards alternative sources of revenue and – in keeping with its no-ads policy – it will focus on developing tools that will enable users to engage with enterprises. These tools will mean that enterprises and other types of organizations can use WhatsApp in much the same way that they use A2P SMS (i.e. sending communications such as notifications and reminders to employees, partners, and customers, typically on an opt-in basis).
Enterprises are increasingly using WhatsApp for internal communications or sometimes to engage with customers unofficially, in a shadow IT or stealth IT capacity. By committing itself to an enterprise-focused strategy and developing the necessary tools and platforms – or perhaps working with companies that can more quickly enable such platforms – WhatsApp will transition from being a “shadow” chat app within the enterprise, to being a legitimate communications channel. WhatsApp should be able to charge its enterprise customers for access or for the identification and verification of phone numbers, among other services. It’s possible that WhatsApp could also set up its own take on an official accounts offering for brands, for which it could also charge.
Given WhatsApp’s slippage in the launch of its VoIP service, the industry might not expect it to move rapidly. At the DLD Conference, Koum explained that although WhatsApp has not yet written any code for the tools, tests would begin later this year. Also the development load on the company might be reduced if it decides to use partners. Koum reportedly referenced Bank of America and American Airlines as potential brand partners.
The A2P SMS ecosystem is already positioning itself to provide APIs and connectivity services for enterprises wishing to use chat apps to engage with their customers and employees. This might help WhatsApp move quicker because it could select from multiple partners with which to work. In addition, WhatsApp will likely benefit from the experiences of its owner, Facebook, as Facebook pursues its strategy of enabling payments and commerce services on Facebook Messenger under the leadership of former PayPal president David Marcus (now vice president of messaging products at Facebook).
2016 Trends to Watch: Communication Services, TE0003-000894 (January 2016)
OTT Communications Tracker: 3Q15, TE0003-000889 (December 2015)
Digital Economy 2025: Consumer Services, TE0003-000876 (November 2015)
Mobile Messaging Traffic and Revenue Forecast: 2015–20, TE0003-000874 (October 2015)
On the Radar: NetSfere, TE0003-000853 (April 2015)
“WhatsApp takes on the challenge of VoIP communications,” TE0003-000849 (March 2015)
Pamela Clark-Dickson, Principal Analyst, Consumer Services
Service Provider Markets
ByMike Roberts 01 Oct 2018
Verizon 5G Home is a milestone in the telecoms market because it is the first large-scale commercial launch of broadband services based on 5G technologies, albeit not on a fully standardized version of those technologies.
Service Provider Markets
ByDario Talmesio 12 Sep 2018
Being first is potentially a good move, but doing it right is far more critical for companies willing to establish themselves as the long-term beneficiaries of new technology such as 5G.
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