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Will WhatsApp go the Hotmail way?

columns Updated: Feb 24, 2014 01:07 IST
N Madhavan

At $19 billion, Ukraine-born Jan Koum-founded WhatsApp is a much bigger gamble for Facebook than the one that Microsoft took in 1998 when it bought Indian-born Sabeer Bhatia-founded web-based e-mail service Hotmail for $400 miillion. Hotmail was without fanfare folded into Outlook.com by Microsoft in 2012, with an unimpressive 350 million users.

Where is Facebook going to recover its investment from? In principle, mobile messaging app WhatsApp has a business model in which users pay after a free first year. But Jan Koum does not like advertisement support. Can Facebook afford to charge? My guess is that WhatsApp users may eventually be given the option to get the service free if they opt for ads, while those wanting ad-free access may pay. Or the users may be nudged to migrate to Facebook Messenger — a la Hotmail and Outlook.

Industry researcher Forrester's analyst Dan Bieler says WhatsApp is really about content-sharing, and that online giants tracking customer behaviour are now stronger than telcos in tapping user behaviour (for e-commerce push and ads).

My take is that Facebook and the telcos may get into cosy deals in which they will bundle in the price of messaging into data plans as they lose out on SMS revenues. But the ad story is different.

Praveen Bhadada of Bangalore-based Zinnov Management Consulting says "analyzing WhatsApp usage behavior will be key to tailoring ads more accurately to users. But the question is whether WhatsApp users will accept this."

In other words, Facebook must do with WhatsApp-based content what Google does to promote its ads with Gmail and search-based queries. Privacy controversies may be looming ahead.