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HindustanTimes Fri,31 Oct 2014

Other big winner in Facebook-WhatsApp deal: Your wallet

Farhad Manjoo , Hindustan Times  New York, February 22, 2014
First Published: 02:02 IST(22/2/2014) | Last Updated: 07:24 IST(22/2/2014)

Facebook’s acquisition of WhatsApp for at least $16 billion has spawned dozens of new millionaires and billionaires, but there was another big winner in the deal: Parents and their teenage children, who have most likely saved hundreds or even thousands of dollars in texting fees thanks to the hugely popular messaging app, and will continue to do so after the deal.

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Before WhatsApp — and Line, Viber, WeChat and a few other messaging apps now being hungrily adopted by young people and adults across the globe — the main way to send a message from one phone to another was through SMS, a technology that routed the text through the same infrastructure that mobile carriers used to handle voice calls.

For the carriers, these texts are essentially free to provide. But because there is little competition in SMS — after you sign up for a carrier, you cannot send your SMS messages through any other provider —  carriers once charged exorbitant rates for texts, minting huge profits.

In the US, until recently, Verizon charged 20 cents a text to customers who did not sign up for a messaging plan. Those who did — at $5 to $20 a month per phone — could bring their costs down to as low as half a cent a message, although that was only if 5,000 SMSs were sent a month. AT&T’s rates were similar, and so were those of many carriers around the world. Analysts’ estimates put global SMS revenue at around $100 billion a year annually — money that was essentially all profit for carriers.

WhatsApp saves heavy texters a lot of money. That cuts into a lucrative service revenue stream for mobile carriers. But Facebook is not complaining. nyt


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