If you aren’t paying for the product, you are the product. WhatsApp just managed to score $19 billion by making a product that users actually want to pay for, rather than tricking them into being a product others paid for. Maybe….just maybe…this signals a shift in the way technology companies do business.
If you don’t understand why Facebook paid $19 billion for a company with 32 engineers — roughly half a billion per engineer — that’s probably because you are American, and you enjoy very cheap text messaging. WhatsApp has 450 million users, the majority overseas. Users pay $1 annually to avoid paying telecom firms a lot more than that to send instant messages to friends and family. WhatsApp shunned the advertising model and all its chicanery — pop-ups, gizmos with x’s you can’t find, and so on — for a paid subscription model. It offered consumers a straight-up value proposition and grew from 200 million to 450 million users in a year. What’s more, it proved users are willing to be for a product rather than be a product.
For a much better understanding of Facebook’s big bet, read Sequoia Capital’s blog entry. But know this: a firm with the motto: “No Ads. No Games. No Gimmicks!” just got rich beyond your wildest dreams. Maybe it’s time to stop tricking users (and advertisers, too) and start giving consumers much more direct value propositions instead.
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