“No ads. No games. No gimmicks.”
That is Jan Koum’s mantra. He’s said it at press events and he says it to himself. In fact, he keeps a note taped to his desk with those words written on it in blue pen.
On Wednesday, Koum’s company WhatsApp, a popular mobile messaging service, entered into a deal to be acquired by Facebook for $16 billion. Assuming the deal goes through, Koum and his team stand to gain significantly, both in terms of their personal finances and access to Facebook’s substantial resources.
But Koum may also face a bit of an existential crisis as a result of the deal: will he be able to hold true to his mantra once WhatsApp becomes part of a social network that has been increasingly aggressive about introducing ad products? For now, both he and Facebook are pledging to hold true to the No Ad rule.
“We think that for our product, advertising is not necessarily the right way to go,” Koum said during an investor call following the acquisition announcement. “We think we have a very solid monetization system in place.”
WhatsApp’s monetization strategy at the moment is to offer its app for free to users for the first year and then charge a $0.99 subscription fee for each additional year that users remain on the service. That’s certainly not a recipe for a billion-dollar business — at least not yet — but when you consider that WhatsApp already has nearly 400 million monthly users, it does presumably bring in a fair amount of revenue.
Mark Zuckerberg, Facebook’s cofounder and CEO, also said that Facebook has no plans to introduce ads on WhatsApp. “I don’t think ads are the right way to monetize,” Zuckerberg said on the call. Instead, the focus will be on helping the service continue to scale up.
Arvind Bhatia, an analyst with Sterne Agee, believes that Facebook may actually allow WhatsApp to delay various monetization efforts, including ads, by giving it the resources needed to grow without having to ramp up revenue first.
“I don’t think that under Facebook, there is going to be any rush,” he says. “There will be less pressure for at least the foreseeable future.”
Bhatia points to Instagram, which was acquired by Facebook in 2012 and is still just in the early stages of trying to monetize. One key difference, according to Bhatia, is that Facebook never specifically said it would avoid introducing ads on Instagram after it was acquired.
“I don’t think we ever heard that in the case of Instagram,” he says. “I do think we can hold them to that and they will stick to that philosophy for a long time to come.”
“But never say never.”
By Seth Fiegerman