Platforms like Facebook and Google collect and analyze user information to develop specifically targeted advertisements,increasing the likelihood that users will be motivated to purchase the products they are pitched.
The personal information that Facebook and Google collect is especially appealing to advertisers, and there have been precedents set where that information is sold directly to companies.
When WhatsApp CEO Jan Koum launched the real-time mobile messaging platform four years ago, he promised users an ad-free experience and promised to maintain their privacy first and foremost.
So deeply held was Koum’s conviction that he posted a sign in his office that read “No ads! No games! No gimmicks!”
In a digital age in which privacy has largely been lost,the 450 million active WhatsApp users appreciated Koum’s commitment to maintain their anonymity. But that gratitude gave way to skepticism the moment Facebook CEO and founder Mark Zuckerberg announced that the app would become the latest addition to the Facebook Empire, an empire notoriously entrenched In its own credo to “make the world more open and transparent.”
Tough to square that kind of commitment with placing a premium on privacy.
Zuckerberg issued assurances that WhatsApp policies would remain unchanged, even allowing Koum to retain a seat on the company’s executive board. Because it does not sell ads, the company makes its $50 million annual revenue by charging its users a fee of one dollar each year.
Even though the app is expected to amass more than a billion users in the near future, this revenue model would be far from adequate in allowing Facebook to recoup the $19 billion spent purchasing the company.
Despite having no immediate way to make money off the platform, Facebook viewed the acquisition at a price that amounts to $42 per WhatsApp user as a strategic long-term investment.
On the surface, it seems that Facebook is keen on finding ways to reinvigorate its user enrollment numbers,which have stagnated a bit recently, especially In developing countries despite its worldwide user network
of 1.2 billion. WhatsApp provides entry to potential customers in countries in which Facebook adoption has languished.
The question of how they monetize that expanded user base is an entirely different matter.
But the play is clearly strategic. WhatsApp offers a viable alternative to users in markets where SMS and wireless
fees are cost prohibitive. This has proven especially appealing to young users, who primarily comprise WhatsApp’s user network. There is no immediate need to announce a new advertising revenue model, as young audiences,especially in developing nations, are notoriously difficult to entice with online ads. However, as these nations
grow more affluent and these users grow older, shifting the platform to incorporate advertising could be prove lucrative.
This eventual shift to ad-generated revenue would be consistent with Facebook’s holistic approach to advertising, developing its own ad platforms that target consumers using similar strategies to those implemented
by Google in its AdSense service.
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