So just imaging this scenario: you are the product manager for a wildly successful mobile application. In fact, your application is so successful that your company got bought by another much larger online company for a lot of money just a few years ago. That was all well and good, but the reason that you got bought was because that other company thought that you would eventually be able to make enough money to justify their investment in you. As a product manager, how would you go about transforming your free-to-use service into a money making machine?
How A Free Application Can Make Money
So way back in 2014, the folks over at Facebook shelled out US$22B to buy the startup app maker WhatsApp. You might be asking yourself, what does this application do that would make anyone be willing to pay that much for it? The answer is that WhatsApp Messenger, or simply WhatsApp, is a freeware, cross-platform messaging and Voice over IP service that is now owned by Facebook, Inc. It allows users to send text messages and voice messages, make voice and video calls, and share images, documents, user locations, and other media. The reason that Facebook was willing to pay so much for this company was because of its popularity – it currently has over two billion users!
As great of an application as WhatsApp is, the product managers at WhatsApp had a bit of a problem on their hands. The product development definition for the app says that it is free and that is one of the reasons that it has been so popular. However, Facebook bought the company because they believed that they could make a lot of money from the application. For the first six years of their ownership this was not the case – the product managers had not figured out how to generate any revenue. However, now things are changing. The WhatsApp product managers now have a plan to make money from the services it provides at no cost to more than two billion users. If they can do this then it will look good on their product manager resume. They are going to give merchants the ability to store, analyze and manage their WhatsApp communications with customers using Facebook’s company servers. Currently businesses must arrange to store and handle such data for themselves.
The plan is for the hosting services to be accompanied by new options for businesses to market their products via WhatsApp catalogs and through Facebook’s shops and checkout carts. WhatsApp, which currently charges businesses for certain types of customer interactions, would profit from the embrace of those tools by merchants. The focus on facilitating user-initiated purchases and customer service through messaging stands in contrast to how Facebook goes about selling targeted ads. The WhatsApp product managers think that this is the way to go because hundreds of billions of dollars are spent every year by businesses to support customer service. This means that the opportunity is both big and different from ads.
Treading Carefully As You Start To Make Money
What the WhatsApp product managers are planning on doing is not the first time that they have tried to create revenue from the application. There was an abandoned attempt to force a core advertising business similar to Facebook’s upon the encrypted messaging app, which was built without the data collection and targeting capacities that drive both Facebook and Instagram marketing. The new decision to focus WhatsApp on commercial interactions reflects the way the service is used by most of its users around the world. In the U.S. and many European countries, WhatsApp is used largely for interpersonal communications. But many users in developing nations, which is where a majority of WhatsApp’s users live, have also adapted the platform to commerce and customer service, and the product managers have sought to accommodate them.
As product managers, we all want our product to be successful. The WhatsApp product is very successful. Each day more than 175 million people message WhatsApp business accounts. Using WhatsApp has advantages for both consumers and businesses when compared with phone calls and emails. The product managers want to find a way for WhatsApp to render itself as an indispensable channel for sales. If they are able to do this then they would be in a position to charge minuscule sums – perhaps just fractions of a penny – to businesses every time they interact with customers on its platform. Given WhatsApp’s scale, such small fees could rapidly add up to big profits.
One of the reasons for its popularity is because of WhatsApp’s long cultivated reputation for stridently protecting its users’ privacy. Pursuing new e-commerce relationships will require WhatsApp to make some changes for shopping-related activities. WhatsApp users’ communications with businesses will still be fully encrypted, but planned integrations with Facebook’s other platforms mean some details of a WhatsApp user’s shopping habits will likely be shared with Facebook’s other platforms, feeding the parent company’s overall behavioral data-collection operation. Storing any data about the substance of a user’s activities would be new for WhatsApp. The company has long maintained that the best way to protect users’ data from hacks, subpoenas and other snooping was to store as little of it as possible.
What All Of This Means For You
The WhatsApp has been a successful and very popular application since it was first created. Its popularity made it an attractive investment opportunity for Facebook who purchased the company in 2014 for a great deal of money. However, the product managers at WhatsApp have been under the gun since the purchase because Facebook bought them with the expectation that the company would be able to make money to pay for the purchase. This is something that was never in their product manager job description. The WhatsApp product managers now think that they have found a way to make this happen.
The WhatsApp app currently has over two billion users. This is why Facebook was willing to spend $22B to purchase the company in 2014. For a long time nobody could come up with a workable plan to make money from the application. However, now the product managers have decided that they want to give merchants the ability to store, analyze and manage their WhatsApp communications with customers using Facebook’s company servers. WhatsApp plans on making money by charging merchants to interact with the customers using the app. There have been failed attempts in the past to generate money from the app. However, this time the product managers think that they better understand how their customers are going about using the app. The product managers do have to be careful, one of the most attractive features of the WhatsApp app is that it protects its user’s identity and connecting customers with merchants may impact this.
The good news for the WhatsApp product managers is that they believe that they have finally been able to come up with a way to make money. Their approach appears to have little or no impact on the majority of their two billion users which is a good thing. As this new revenue generating service is implemented, the WhatsApp product managers are going to have to be careful and make sure that the promises that they’ve made to their users regarding their privacy can still be kept. If they are able to successfully do this, then perhaps Facebook’s investment in WhatsApp may eventually pay off…!
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that the WhatsApp product managers should tell their customers that their privacy may be impacted by the new service?
Click here to get automatic updates when The Accidental Product Manager Blog is updated.
P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!
What We’ll Be Talking About Next Time
Good news for product managers – nobody likes to get old! In fact, nobody really likes to look like they are getting old. What this means for product managers is that there is a huge market for products that will allow us to avoid looking like we are getting older. One of the most successful of these products is called Botox and it’s an injection that you can get in your skin that will make your wrinkles disappear. Who wouldn’t want that? The Botox product managers have had a good run for a long time. However, new competitors are now showing up and the Botox product managers are going to have to review their product development definition and take action if they want to remain successful.