How WhatsApp could go $1 to $100 billion?

Who is the 'user' Vs 'customer'?

Sep 14, 2023

Welcome to the 181st edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 95,200+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more

Zuckerberg spent $19 Billion to buy WhatsApp & everyone (including me) thought he had overpaid. WhatsApp made $1 Billion in revenue in 2022 & it’s sitting on insights to take the business to a $100 billion annual cash cow - here’s the story ⬇️

Let’s jog our memory a little 🗓️
In 2009, two ex-Yahoo engineers were irritated with online ads. They set out to build an app that would never run ads. So, WhatsApp was born to give you a true online experience without any ads. Fast forward to 2023, WhatsApp is more than a messaging app.

WhatsApp’s core value prop - NO ADS 🥹
It did a lot of small experiments, like charging users $1 a year to use WhatsApp. But it eventually sold to Facebook with no pathway to monetization. The simple agreement was that ‘WhatsApp would never surface ads’.

But, Facebook = God of advertising ⛪️
Sure, Mark thought WhatsApp could get even bigger than Facebook, and he was right - but what he definitely thought was if people are spending so much time on WA, he’ll find ways to make money eventually.

Monetisation for WhatsApp 🙇🏻‍♂️
If WhatsApp had charged users $1/ year, it could have become a $500 mil/ $1 billion annual revenue company. WhatsApp has 2.7 billion free users, even 10% of users paying for it can make good cash.

But, then it’s a lost opportunity 🥹
The appetite to pay for WhatsApp does not lie with the majority of its consumer-centric base (people like you and me) - it’s the businesses that want a piece of this attention from consumers.

Let me take a small number - $84 billion 💸
That’s the size of the “SMS” market of the world. Tiny compared to other markets like fintech, and health tech right? Wrong!

Airbnb is a classic product that grew the market!

This is a classic lack of imagination. Would it be right to predict the size of today’s automobile market by looking at how many horses were used back when IC engines were still new? Nope.
WhatsApp’s market is “communications”📱
And not just people like you and me talking to each other over chat but businesses talking to their customers. It’s also businesses being able to sell over WhatsApp & even to save/invest/ lend money right within the WhatsApp ecosystem.

The $1B → $100B game-plan for WhatsApp?

1/ Businesses replacing email/ SMS with WhatsApp 🤑
WhatsApp currently makes ₹ 0.3/message for utility & ₹0.72 for marketing messages from brands. This is when the brand sends a message to the customer without the customer initiating a chat. More nuances here that you can Google.

2/ UPI market share <> lending eventually 🤯
The floodgates for WhatsApp UPI aren’t open yet - RBI being the culprit to ensure WA does not monopolize the market. But, WA will eventually get the UPI share in upwards of 30%. Credit on UPI will solve for adoption + opening of lending powered by partner banks as a native offering.

3/ Merchant payment gateway commissions 🛍️
Only 50 players in India have been granted payment aggregator licenses. WhatsApp will have to partner with the homegrown players if it wants to handle POS payments done from P2M (peer to merchant).

4/ Business tooling for SMBs 💻
It launched the first product in its business suite with screen-sharing through its mobile app. It wants to eat the piece of the pie from Google Meet & Zoom by democratizing cheap conference video calling with chat + screen-share support.

5/ Storage as the currency ✨
WhatsApp chats/media files are stored for free for now. You will see pricing come in for storage, once the majority of the 2.7 billion customers cross the point of no return. Simply, users can no more store all of that data elsewhere at a nominal cost. For most users, these are memories.

But, all of this is just the start 💭

The whole “status” tab on WhatsApp being a “feed” of endless scrolls is the big bet WhatsApp will take eventually. It’s the only way it will open floodgates to making a really large business based on “ads” - the same reason why WhatsApp founders exited Facebook early on.

It might not be what they wanted to build, but sometimes products outgrow their founders, even if they don’t like it.

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