Written on February 22, 2014
If you still do not know, here’s the top news of the week: WhatsApp has been acquired by Facebook for $16 billion. Yep, WhatsApp, Facebook, $16 billion. With all the buzz around this news and countless articles written about it, I decided to join in the fun. However, I will not try to explain why Facebook acquired WhatsApp (this is a good article by its sole investor, Sequoia Capital by the way) or contextualise the $16 billion acquisition by comparing it with 7.5 Mark Cubans. Instead, I will take a look at their marketing and business development.
Yes, that is a zero. That is how much WhatsApp has spend on marketing so far. Judging at how much the CEO, Jan Koum hates ads, I will be surprised to see any ads about WhatsApp. Word of mouth is probably the only marketing they had, and it is not even done by them, but by happy customers.
0. There may be no greater testament to the viral nature of WhatsApp than the fact that the company has accomplished all this without investing a penny in marketing. Unlike their smaller competitors, it hasn’t spent anything on user acquisition. The company doesn’t even employ a marketer or PR person. Yet like the world’s greatest brands, it’s created a strong emotional connection with consumers. All of WhatsApp’s growth has come from happy customers encouraging their friends to try the service. — Jim Goetz, on behalf of Sequoia
As much as I advocate the importance of marketing for a success of a business, WhatsApp has proven me wrong. It has achieved 450 million users with 72% daily active users, without spending a single cent on marketing. This is an important lesson. While marketing is an important factor in the success of a business, the product itself is the basis for success. People are essentially attracted to the value provided by the product. You might then ask, “Is marketing still necessary?” I would still say yes for majority of the businesses. However, creating value for your customers through your product should be prioritised above having a great marketing campaign.
For business development, we usually talk about how businesses can grow or acquire new revenue streams. If we look at similar messaging apps like Line, Viber, WeChat, KakaoTalk which are free, we will realise that most of them make money through in-app purchases, especially stickers. WeChat even has e-commerce, banking and wealth management services. On the other hand, WhatsApp do not have such fanciful features as it does not want to interfere with the core user experience.
WhatsApp knows about stickers and Asian chat apps. It doesn’t care about them, and it doesn’t have to. This article gives a good analysis of WhatsApp with respect to other messaging apps, including Facebook Messenger. A key point I want to highlight from the article is this:
If WhatsApp invests time, money, and manpower in developing faddish stickers and games, what happens if its users suddenly get tired of these features, just like how Facebook users got tired of Mafia Wars? The pressure to maintain revenue streams grows much higher.
While businesses constantly seek to find new ways to make more money, it is important to think about whether these new avenues will affect the core business and whether they are sustainable. Instead of developing more ways to make money from its customers, WhatsApp focuses on improving their app and providing a valuable core product. Here’s another lesson. The way you grow your business should be in line with your vision. Do not pick up a new revenue stream if it brings you money but destroys your product. For instance, if you feel that your product is best experienced without ads, then do not have ads! Save the time, effort and resources to make your product better or find ways that grow your business in line with your vision.
In summary, WhatsApp has taught us 2 important lessons:
- Creating a valuable product is more important than having a great marketing campaign.
- Grow your business in line with your vision, not simply where the easy money is.
Do you agree with these 2 points? Leave your views below (: