I marvel at how Facebook zigs where others zag.
WhatsApp, the messaging company Facebook (FB) bought a couple years ago for $19 billion, said Monday it’ll no longer charge a $1 annual subscription fee for some users after their first year. The amount seems trivial, until you consider that WhatsApp, according to a company blog post, has nearly 1 billion users.
The bit about zigging versus zagging is that the Facebook unit is abandoning subscriptions just as the rest of the world is going gaga for them. Netflix (NFLX) , HBO, The Economist and others are widely admired because customers pay top dollar to be entertained and informed by them on an ongoing basis. No trashy content or trashier advertisements for entities like this. (HBO and Netflix sell no ads.) Or consider high-quality podcasts like Serial, which sell high-priced (and classy) ads to reach subscribers who don’t pay anything at all.
Then there’s WhatsApp, which said collecting a buck from such a big pool of users, many of whom don’t have debit or credit cards, was getting too difficult. The company’s response won’t be advertising, by the way. Moving to the revenue model that has made its parent, Facebook, worth $268 billion would be too logical. Instead, WhatsApp is exploring ways to charge businesses to message their customers.
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As an aside, I picked up a fresh piece of lingo from a Wall Street Journal dispatch on the WhatsApp move. It quoted WhatsApp co-founder Jan Koum, speaking at the DLD European technology conference in Munich, making reference to the “so-called commercial-participation model.” This is significant as it’s an evolution of the ultra-successful “freemium” model that only charges certain customers, typically those willing to pay for premium features or more volume. “Commercial-participation” suggests soaking companies to subsidize consumers, an echo of Google (GOOG) making its outstanding search results free but charging for search-driven ads next to them. Smart.
More on Facebook’s revenue model:
Facebook’s willingness to experiment and to take the product-development high road reminds me of another Google move, its years-ago refusal to slap schlocky ads on early YouTube videos. Few companies can resist easy revenue in search of bigger businesses. The best ones can.