Jan Koum

The creators of Whatsapp, Silicon Valley’s most coveted mobile application, are playing the long game.

The name of the app, like its founders, is unassuming. Whatsapp, a mobile messaging service that offers unlimited and free texting, as well as audio and video messages, to anyone in the world with an Internet connection, has exploded in scale since its beginning in 2009. According to company figures, Whatsapp currently counts more than 250 million active users, more than Twitter’s 200 million and only 30 million users short of Microsoft-owned giant Skype.

If Whatsapp’s figures have grown so much in such a short period of time, it is because the application’s development has coincided with the smartphone revolution, which has seen an increasing number of users moving from computers to mobile platforms such as iPhones or tablets. “The world is moving towards the smartphone and we have taken advantage of this revolution”, co-founder Brian Acton stated in a rare interview to the Spanish newspaper El Pais.

Indeed, the PC market is steadily shrinking, with shipments falling from 350.4 million in 2012 to 345.8 million in 2013. The International Data Corporation projects that, by the end of 2013, PC shipments will have fallen by a total of 4.2% in one year. Such statistics raise important questions for prominent Silicon Valley firms such as Facebook, which is now scrambling to translate its services to mobile platforms as quickly as possible. If one is to believe the rumors roaming around the tech world at the moment, Facebook has likely already made an offer to purchase Whatsapp, a “shrewd move”, according to Founder of Ironfire Capital Eric Jackson, aimed at turning what could be the “next Facebook” into a subsidiary of Facebook.

Selling the thriving OTT player, though, does not look like something Whatsapp founders Jan Koum and Brian Acton are prepared to do. Back in July 2012, Koum remarked in a tweet, “people starting companies for a quick sale are a disgrace to the Valley”. There are many reasons to not sell Whatsapp at this point in time, as Eric Jackson enumerates over at Forbes. More than any other, though, is the founders’ clear desire to build their kind of company, focused more on user satisfaction than on maximizing profits. As many commentators have pointed out, Koum and Acton could easily sell their companies today and go from millionaires to billionaires almost overnight, but they have so far refused to take such a step.

A commitment to privacy

Despite the company’s worldwide renown, the operations of Whatsapp are largely shrouded in mystery. The company’s headquarters are located in an unmarked building somewhere in Mountain View, California, according to the El Pais article. The founders work alongside their staff, 30 full-time and 5 part-time employees, in a 100-square meter room with graffiti on the walls and whiteboards on every available surface. The Mountain View office reportedly deals mainly with customer service issues, with technical development taking place in Russia.

Even less is known about Koum and Acton themselves. On the company website, the only information concerning the founders states that the two “spent a combined 20 years doing geeky stuff at Yahoo! Inc. before starting WhatsApp Inc.” As the app has grown in popularity and as a business, Koum and Acton have continued to avoid attention. When Whatsapp won the 2012 Best Overall App award at the World Mobile Congress in Barcelona, a marketing representative was sent to collect it on the founders’ behalf.

Furthermore, this emphasis on privacy seems to extend beyond the lives of the founders and into the nature of the app itself. At a time when an increasing number of tech startups use the personal information of their users to generate capital, normally selling such information to advertisers, Whatsapp has refused both to register and sell user data and to host any kind of advertising. Koum and Acton’s previous employer, Yahoo, does both, which is likely one of the main the Whatsapp founders set off to start their own business.

“We oppose data tracking,” Acton stated to El Pais. “It is in our DNA as a company and as people. We value privacy and security tremendously. To do that would be to go against our principles.” As for advertising, “we knew we could do what most people aim to do every day: avoid ads.” Koum and Acton, who are both engineers by training, bemoan the fact that, as companies seek to monetize their activities through advertising, engineers are forced to spend an increasing portion of their time mining personal data, then packaging it up to be sold on to third parties. “At Whatsapp,” the founders argue, “our engineers spend all their time fixing bugs, adding new features and ironing out all the little intricacies in our task of bringing rich, affordable, reliable messaging to every phone in the world.”

Profits vs. Growth?

While such remarks make Koum and Acton sound like humanitarians, there is also a strategy behind their decision to avoid advertising and data mining. The key asset of Whatsapp is their number of active members, and any attempt to monetize too quickly could see many users opting for a rival app, such as Viber or Line, with users being turned off by advertising or by the idea of their personal information behind sold to others. For the moment, Koum and Acton have rightly focused on building their member base rather than maximizing the app’s profits. After all, Facebook’s first valuation was not based on its revenue intake but on its potential through such a large network of users.

In the meantime, Whatsapp is also making good money. Though the company does not release its figures, it has already started to monetize its activities, charging users an annual fee of $1 after one year. It is Koum and Acton’s belief that users will prefer to pay a negligible subscription charge if it means accessing Whatsapp’s full range of services and avoiding advertising. It’s a business strategy that shows Whatsapp is committed to building their product into a long-term success, and not for a quick sale. How things go, only time will tell.


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