WhatsApp Ditches $1 Annual Fee, Tests Business Accounts But No Ads, Says CEO

Today at the DLD conference in Munich, Germany, the CEO of Facebook-owned WhatsApp made a couple of big announcements about how the messaging app plans to evolve to its next phase as it approaches 1 billion users: the company plans to drop its $0.99 annual subscription fee, and it will start to test out more commercial services — specifically a B2C business for companies to communicate with their customers.

The B2C business is in a testing phase now, WhatsApp CEO Jan Koum said, with the focus on large corporate customers like Bank of America.

The subscription fee — which used to kick in after a year of free use — may be getting scrapped in favor of alternative revenues. But this won’t include ads, Koum said.

“We’re going to get rid of the $1 subscription,” Koum said, later admitting that the backup business model — courting corporates to build B2C services — is still pretty nascent. “We haven’t written a single line of code, [but we want to] make sure people understand this is not about ads in the product,” he said.

If you recall, when Facebook announced it would acquire WhatsApp for $19 billion almost two years ago, both companies were unequivocal about not putting ads into WhatsApp and sharing user data with commercial entities.

WhatsApp last updated its user numbers — who connect to the service by way of their mobile phone numbers, a hot link in a space where app developers oftentimes don’t “know” their users that well — at 900 million this past September. This profile in Wired notes that today the actual number is around 990 million.

That is a tempting amount of scale for a digital advertising business, making the commitment to no ads all the more interesting to watch, to see how and if it ever bends or gets dropped altogether.

In any case, since we have not had much transparency on what subscription fees brought to WhatsApp’s bottom line,  it is not clear how big of a revenue gulf will result for WhatsApp from scrapping subscription fees. Anecdotally, I have been using the app for a while and cannot recall ever paying to do so. Several others have noted the same to me.

The reason for scrapping the fee may be more than simply moving to a different revenue model, too.

The messaging app field is very, very crowded, with many lookalike apps offering essentially the same functionality — to WhatsApp add Facebook’s own Messenger, WeChat, Line, Viber and more — and many others that are offering their own takes on the basic premise — for example Snapchat with its image-based ephemeral notes, or Wickr and Telegram with their ephemeral, encrypted services.

On the B2C front, there is also the spectre of competitors from other directions. Slack, for example, has focused mainly on messaging for teams within companies as well as looser, like-minded communities. Today, users can already integrate other CRM apps to use Slack to manage customer interactions, but it seems like an obvious move for the startup to build out a native product like this to manage those interactions itself.

Turning back to WhatsApp, we have no information yet about how much WhatsApp would charge businesses to be a part of this new B2C effort.

The commercial service, Koum said, will start in the form of a test. “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,” Koum said. He named Bank of America and American Airlines as two possible kinds of companies that would be working with WhatsApp. It sounds like there are around 10-30 businesses already talking to WhatsApp for the service.

“We want to build things that are utilitarian,” he said. “That allows a company like American Airlines or Bank of America to communicate efficiently through a messaging app like WhatsApp.”

The conversation on stage also ranged into how Facebook Messenger and WhatsApp were different from each other. Indeed, Messenger, which has 800 million users, is also working on how to build services with businesses.

“I think there is some aspect of a geographic split,” Koum said, with WhatsApp particularly strong in developing markets and Europe. “It’s [also] about user experience,” he added. He was not asked about, nor did he address, the fact that Messenger is also building business tools, as well as its own intranet messaging service via Facebook at Work.

“Facebook is a little different in terms of UX, stickers and things we don’t have,” Koum continued. “What we find, interestingly enough, is that you may think messaging is limited but it’s not. People find more bandwidth to use different things that are out there.”

Facebook — via WhatsApp and its own Messenger product — is not the only one trying to figure out ways of leveraging free messaging services to build commercial operations in other ways.

Twitter has been working with a number of companies working on ways to build CRM tools for companies who may start public interactions with users to take those conversations into the DM channel and link up customer and Twitter accounts to serve them more efficiently.

In many cases, the tools that companies like Facebook and Twitter are trying to build are natural and obvious extensions of how these platforms are being used already as less formal ways of keeping people connected to their customers.

Building products around those existing actions also ties the consumers more closely to the platform that is being used to do that communicating (in this case WhatsApp at the expense of one of those many other messaging alternatives), and possibly making a little revenue out of it in the process.

In terms of other new WhatsApp products, the company is also working on adding more encryption.

“We’ve been doing it without people even realising it’s happening,” he said, somewhat alarmingly. He says “we are still there a couple months away” from all your messages being end-to-end encrypted but that is the goal. It will be, Koum said. “the largest installation for end-to-end given our user base and how many people we have [using WhatsApp].”

Koum didn’t address, nor was he asked, about the fact that WhatsApp had been blocking links to one upstart encrypted messaging app, Telegram. However, the fact the WhatsApp is building its own encryption tools could be the simple explanation why: it may be a lot smaller, but Telegram is still competition.

It’s not clear if WhatsApp plans to charge for extra services, such as special encryption, as part of its new revenue strategy.