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(DADO RUVIC/Reuters)
(DADO RUVIC/Reuters)

WhatsApp's mega-money signals rush toward a subscriber economy Add to ...

Though there are many good explanations of the importance of the gigantic WhatsApp deal – from the shift toward mobile to the importance of the phone as the home of messaging – I would argue its emphasis on the subscription model is actually the signal for where tech and mobile are heading.

Unlike so many other apps, which rely on ads or have no business model at all, WhatsApp gives customers what they want – and then charges them for it. This works for WhatsApp for two reasons: first, it’s a better solution to a pre-existing need; and secondly, it’s everywhere.

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It sounds like it should be common sense, but a paid subscription is actually quite radical. Ad-based companies are constantly in conflict with their own users, incessantly balancing the company’s desires with its customers’. After all, giving up information or privacy isn’t something people want – it’s just something they put up with in order to have free services. Facebook and Google’s model is to walk a fine line between providing a utility to users, but also extracting information from them to target ads.

Eschewing that model for the simplicity of paying monthly or yearly for a service you want makes a lot of sense, at least for consumers. It explains why, for example, Netflix is increasingly preferable to cable. Instead of hundreds of shows you don’t want and no end of ads for too much money, you simply pay a reasonable monthly fee for a reasonable selection of content.

But you also need a compelling set of features: WhatsApp currently charges 99 cents a year to users, who (for the most part) pay because the key features – unlimited messaging, group chats, and media sharing – bested the offerings from both texting (on price) and tech giants (on cross-platform function).

Secondly, when I say WhatsApp is everywhere, I mean that it works on anything. A Facebook or a Google might decide ad revenues from a Blackberry or Windows Phone app aren’t enough to justify development costs. A for-pay service like WhatsApp approaches things the other way round: if you want people to pay for your service, you need to not only ensure that they have a reason to use it, but also that they can get it on their tech.

WhatsApp’s potential for growth will always have an edge on proprietary services like iMessage or Google Hangouts that are either restricted to one platform or to modern smartphones. Maybe even more significantly, WhatsApp is not just on iOS, Android, Blackberry and Windows Phone; it’s also available for systems like Symbian and Asha that are popular in Asia and Africa. That open, cross-platform approach also allowed WhatsApp to grow and go global in a way that, say, Blackberry’s BBM just couldn’t, given its belated jump to other devices.

As obvious as it sounds, building something people want and then asking them to pay for it might be the new “radical” business model that represents the future. There is a question whether the can survive outside islands like WhatsApp, Netflix and some of Apple’s offerings. It faces competition from both the Kickstarter approach – in which people pay up front to fund services or products before they launch – or what in the gaming world is called “free-to-play,” in which basic use of a service is free, but where you are constantly nudged to pay for extras and upgrades. Perhaps it’s a situation in which multiple models will co-exist.

The question everyone is asking now is whether this model can be worth as much as Facebook paid. Most observers’ jaws fell at the sheer amount of money in this deal, and it’s hard to blame them. As this web site points out, the things that are worth less than WhatsApp’s staggering $19-billion purchase price include The Gap, the world’s music industry, and Jamaica’s GDP.

Perhaps the fact that WhatsApp became so valuable so fast is a signal that a change isn’t just on the way, it’s already here.

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