WhatsApp is Different

It has been over a week since Facebook announced its intentions to buy WhatsApp for about $19 billion (all told.) The news obviously generated a lot of debate and a lot of commentary filled the airwaves. The stock market more or less approved of the deal, giving Facebook stock and market capitalization the requisite bump it needed. I argued that it was an irrationally rational deal.

Since I started a new gig, I sort of ignored most of the published commentary. A couple of days ago in a conversation with my new colleague at True Ventures, Keila Fong, we started talking about how different really is WhatsApp that it is worth $19 billion to Mark Zuckerberg. So we ran some numbers and compared WhatsApp’s numbers to some of the other social applications.

These charts show that not only WhatsApp is different, but it is exceptional and did well to capture the moment (i.e., rise of the mobile broadband) near perfectly. They are also not just exceptional, they are a standout with highest rate of growth and getting to that point the fastest.

1. Peak Number of Monthly Active Users: This shows the peak number of monthly active users for a number of services/products over their lifetime. The data is from official sources when possible, otherwise the numbers are reported in press coverage; the methodology for calculating these numbers varies significantly and is often misreported (e.g., total users will be called MAU), but even only with directional data, the differences in scale are still clear.

2. Monthly Active Users by Product Age: The x-axis shows the age of the product (years since company founding or product release). What you can see is that mobile is like rocket fuel — volume and growth are just massive.

3. Monthly active users per employee: WhatsApp is just phenomenal compared to its rivals. Our takeaway: companies are reaching scale faster and more efficiently.

4. For context, Internet and Mobile Users: This shows the growth of total internet users, total mobile cellular subscriptions in the world, and total broadband subscribers. The data is from the International Telecommunication Union (an agency of the UN) aggregated by the World Bank. The trajectory of growth of WhatsApp pretty much mirrors the growth of mobile data.

Other observations:

  • Mobile broadband is just on a hockey stick type trajectory and will be for a while.
  • The growth of mobile data is one of the reasons we see faster growth for some of the newer companies. Historically the gradual growth of fixed line broadband was a reason we saw a more gradual increase in the monthly active users on various old services.
  • Mobile + broadband has made time-to-big shorter and shorter. WhatsApp crossed the 200 million MAU line in just over three years, while YouTube took over four, Facebook took around 5, Twitter took around 6, and Skype took around 8. Instagram and Snapchat have yet to reach that scale.
  • Surprisingly few companies have made it beyond ~300 million monthly active users. WhatsApp had only just crossed that line. Just check out how low the numbers were for some of the much “hotter” companies.
  • WhatsApp reached an unprecedented level of operational efficiency, but there are similarities among the three most efficient companies (Whatsapp, Instagram and Snapchat); mobile has enabled lightweight scaling. Facebook has made a run at all three and succeeded in two of its three attempts. These three companies are also the youngest in this comparison and are/were on a comparable growth trajectory to the current big companies (e.g., Facebook.) Perhaps it isn’t very surprising that Facebook wanted to nip the threats in the bud.
  • These high growth apps and threats to Facebook’s core have come from the great unbundling of Facebook, something I pointed out in my Fastcompany column, Facebook Backlash.
  • Their growth trajectories weren’t shown, but Facebook mobile is also notably fast-growing. Facebook and YouTube are similar ages and have followed parallel high-growth trajectories.

Addendum:

A reader emailed and point out that WhatsApp initial success was because it “spent time building for platforms that were not sexy – Blackberry, j2me, Early android OS” and it “grew internationally once SMS fees started creeping up and first set of cheap prepaid data plans showed up.” Since Whatsapp uses very little bandwidth, “carriers started taking notice and instead of pitching full data packages, started unbundling data and started offering WhatsApp packages.” Reliance in India being a prime example, mostly as a result of growing penetration within each country. These were usually promoted very heavily within each country. At one point, people in india were paying 15 rupees per month for unlimited WhatsApp instead of spending more on data. That is incidentally what Facebook is trying to do — unbundle Facebook from flat-rate data plans for everything.

The post was created with Keila Fong.

Responses

  1. noahzharris says:

    March 13th, 2014 at 1:59 pm Reply

    such a great post

    - Noah Z Harris

  2. Sumocat (@SumocatS) says:

    March 13th, 2014 at 8:28 am Reply

    “Since Whatsapp uses very little bandwidth, ‘carriers started taking notice and instead of pitching full data packages, started unbundling data and started offering WhatsApp packages.’” — Which is a violation of net neutrality. Whatsapp is different.

    1. Om Malik says:

      March 13th, 2014 at 12:19 pm Reply

      Sumocat it is actually not — not in countries where they have these deals. India has very different rules for networks and how bandwidth gets charged for.

  3. Gustaf Rydevik says:

    March 7th, 2014 at 3:03 am Reply

    What is “monthly active users” measuring? in the case of Google, is that Google+? ‘Cause I believe they have ~1 billion unique users per month for their search engine, and they definitely don’t have >1million employees.

  4. Prosper B. Wealth says:

    March 5th, 2014 at 3:54 pm Reply

    I’m noticing a trend.

    Most of the present day growth hackers (such as Whatsapp) had a hard-on experience in operations of former growth hackers (such as RIM’s Blackberry).

    We look forward to more cheaper data – internationally… and also more strategic acquisitions that may become future threats to the survival and relevance of the big boys.

    Come to think of this… will Facebook become the next Google [acting on fear]?

  5. Abby says:

    March 5th, 2014 at 10:05 am Reply

    I’m a constant Whatsapp user. I’m not exactly thrilled with Facebook’s acquisition- WhatsApp is pretty huge on its own and Facebook’s popularity has been dwindling in the last year. The demograph here is obviously just my social circle but I can tell you based on my observations that WhatsApp really is very popular and user-friendly. No wonder their charts are unprecedented

  6. Desire says:

    March 5th, 2014 at 6:25 am Reply

    Wow the numbers are staggering! And good for them, good for Google, good for the guys who come up with these ingenious marvels of technology!

  7. nickcaruth (@nickcaruth) says:

    March 4th, 2014 at 7:21 pm Reply

    Stilted commentary, as usual from Om. How about the miracle of craiglist who employs a limited number of people? Or the fact that WhatsApp can be railroaded by any number of competitors, including the service providers, manufacturers and others? Pls though, buy into the bullshit hockey stick graphs. Wait, people worldwide are increasingly using the internet AND are signing up faster for this app than for services that reached less 5-10 years ago? SIGN ME UP. What about the other messaging apps which are comparable in size? Why don’t they appear in your graphs (hint: it makes the graphs look weak). Here’s to your exit from other media!

    1. Om Malik says:

      March 4th, 2014 at 8:28 pm Reply

      Nick

      If you would be so kind — find me the numbers of other messaging apps you talk about and share them with me and rest of the world. It would be useful for all of us. To be clear, the charts are essentially a look at how things have changed and are changing, thanks to the emergence of mobile broadband and its impact on adoption. Clearly, you have a good grasp on all that, so it is appropriate you find them less than useful. I would say, your time might be better spent elsewhere where things are more to your liking.

  8. Jim Hassinger says:

    March 4th, 2014 at 2:08 pm Reply

    So, they’re buying us, really, co-opting rivals for our eyeballs, with their own stock? What are the tech billionaires building here? And who is it there for?

  9. Michael I. Waitze (@MichaelWaitze) says:

    March 4th, 2014 at 1:29 pm Reply

    Why was the Line Chat application not included in this analysis? Would love to see it included in these comparisons as well

  10. Rashi says:

    March 4th, 2014 at 11:30 am Reply

    Good u cleared a lot of doubts regarding the huge deal

  11. mcscarry says:

    March 4th, 2014 at 8:45 am Reply

    Thank you for visualizing these with graphs.

  12. piyushpujara says:

    March 4th, 2014 at 4:22 am Reply

    Really very useful post .. :)

  13. Lindolfo Reinert (@leereinert) says:

    March 4th, 2014 at 4:10 am Reply

    Interesting. It make sense in a sort of approach. However I wonder whether it needs some other views… What about the direct competitors? It looks like we are comparing different elements, but it is really interesting

  14. dordor says:

    March 4th, 2014 at 2:35 am Reply

    The problem is customer stickiness. These massive number of users generate very little revenue. There is very little tying them to the platform other than each other.

    Attempts to monetize those users run a high risk of alienating many of them causing them to leave for another platform. This created a cascade effect of migration.

    While being able to buy access to such a large number of users is potentially worth a lot, you can’t recoup your investment on hopes and dreams. They have to be monetized.

    They only need to return $5 per user per year for ~10 years to get their money back. Seems easy enough. However right now they charge some users $1 a year and have no ads. Given the supposed terms of the deal, advertising seems to not even be possible for some time, at least. They certainly aren’t going to raise the yearly fee 500% or more. Either of those things would cause a large percentage of those 450 million users to vaporize.

    Let us not forget these are not all first world users. As harsh as it is to say, it does mean a substantial part of those 450 million users are worth less, from a monetization standpoint, I know Zuckerberg has plans with Internet.org but I still have a hard time seeing how paying 19 billion dollars for a userbase that is connected on the thinnest of strings is going to end up being an investment that ever pays for itself financially. From a traditional financial standpoint each of these users has to generate four or more dollars PROFIT each year. Technology investments have traditionally looked for even smaller windows than ten years. A five year roi would require $9 plus per year, per user in profit.

    1. Marcos_El_Malo (@Marcos_El_Malo) says:

      March 4th, 2014 at 7:32 am Reply

      Advertising is really not the only vehicle for monetization. Use your imagination!

      1. dordor says:

        March 4th, 2014 at 11:50 pm Reply

        True! They could sell all the messages to the NSA and GHCQ.

        1. Om Malik says:

          March 5th, 2014 at 7:17 am

          There is that…. ;-)

    2. Jon C (@JonCBK) says:

      March 4th, 2014 at 8:18 am Reply

      Nice points Dordor. But if one assumes that WhatsApp continues to grow at a very fast pace, the $5 threshold you set drops very quickly. I don’t think this works out, but if WhatsApp gets to a billion users then it does.

      And keep in mind Facebook is using Facebook stock, they are in essence doubling down but they aren’t really taking on new risk.

  15. Chetan Ahuja (@IAmChetanAhuja) says:

    March 4th, 2014 at 1:43 am Reply

    I’m curious to know the source of the numbers for WeChat (and QQ etc.). My understanding is that they are much bigger than the charts shown here.

    1. Om Malik says:

      March 4th, 2014 at 5:58 am Reply

      These are all publicly available numbers from various news reports and other sources such as research reports.

  16. Bela says:

    March 4th, 2014 at 1:42 am Reply

    This is such a informational blog here… It’s very interesting.. worth keeping bookmark for it..!!

  17. antolomagico says:

    March 4th, 2014 at 1:13 am Reply

    I got rid of Facebook one month ago and I live happier now. I haven’t Whatsapp and I can still survive in the world…

  18. Antonio Tejada says:

    March 4th, 2014 at 12:21 am Reply

    ‘A reader emailed and point out that WhatsApp initial success was because it “spent time building for platforms that were not sexy – Blackberry, j2me, Early android OS” and it “grew internationally once SMS fees started creeping up and first set of cheap prepaid data plans showed up.”’

    That’s a great theory, it’s just demonstrably incorrect. Its early success was iOS-only — other platforms came later. And in the time since WhatsApp launched, I’ve seen no evidence of SMS fees “creeping up”, if anything, they’ve gone down, thanks to the competitive assault from all sides (WhatsApp, BBM, Facebook messenger, iMessage, etc.).

  19. haridasgowra says:

    March 3rd, 2014 at 8:52 pm Reply

    useful post! nice to share this@

  20. nik (@n13) says:

    March 3rd, 2014 at 8:13 pm Reply

    Great article. Nothing really new but seeing the data on these charts does give one a sense of the scale of growth. The scale is hard to fathom for internet oldies like us.

    Mobile data with its hockey stick curve is going to also produce hockey stick curves for mobile-first apps that become popular. The number of mobile users simply dwarfs computers and broadband.
    It’s interesting because we thought that Google search ruled the world. Now we’re finding out that the entire browser interface is 10% of the market. 90% is up for grabs and only getting filled in just now.

    That’s even worse news for Microsoft – the previous king of the world is now king of an irrelevant platform.

  21. Reallyyy.com - A Blog about Your Biggest Pet Peeves says:

    March 3rd, 2014 at 7:01 pm Reply

    Om really like the blog here! Great stuff! -Bill

  22. Daniel Duan (@denialduan) says:

    March 3rd, 2014 at 5:04 pm Reply

    QQ, Qzone and WeChat are essentially different aspects of the same service.

    1. Ben Thompson says:

      March 3rd, 2014 at 7:19 pm Reply

      That’s like saying Gmail and Google search and YouTube are the same. Sure, all three are tied together with Google Plus, but they’re clearly different.

  23. aparnapaul says:

    March 3rd, 2014 at 12:07 pm Reply

    Much informative

  24. Anna says:

    March 3rd, 2014 at 11:27 am Reply

    It’s really refreshing to see a statistical (i.e. non-anecdotal) analysis of a popular application. This was a really interesting article, welcome to the Freshly Pressed club! :)

    1. Om Malik says:

      March 3rd, 2014 at 2:50 pm Reply

      Thanks Anna :-)

  25. Kevin Idehen says:

    March 3rd, 2014 at 11:22 am Reply

    Reblogged this on The Kevin Idehen blog… and commented:
    Operational excellence, the choice of Whatsapp

  26. Kevin Idehen says:

    March 3rd, 2014 at 11:19 am Reply

    An excellent write up…..

  27. segmation says:

    March 3rd, 2014 at 11:04 am Reply

    I think we need to watch WhatsApp and see what it does in the future!

  28. Holly M. Acito says:

    March 3rd, 2014 at 11:03 am Reply

    Reblogged this on Ditching Dull and commented:
    Great data in this blog about Whatsapp. Do you think it was worth 19 billion?

  29. nunniie says:

    March 3rd, 2014 at 10:59 am Reply

    Reblogged this on nunniie's Blog and commented:
    Wowww

  30. gypsyprincess says:

    March 3rd, 2014 at 10:53 am Reply

    wow very informative and interesting! good job

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