After Apple released a number of new IOS features at the WWDC in early June that one might have seen before in the occasional app here or there, a more or less perceivable outcry went through the blogs of Apple followers and developers.
“The SMS is dead!” I read everywhere. iMessage, a built-in iPhone-to-iPhone chat client is to revolutionize our way of using SMS. Great, because I always found writing text messages annoying!
What I did not reat in all the (exaggerated) excitement: What does this new expansion mean for existing apps like the WhatsApp Messenger ?
Granted, WhatsApp did not invent instant messaging, but the app certainly was a pioneer. For the first time we did not have to laboriously enter contact information on the phone to start a chat. And by now WhatsApp is available for various platforms, which makes it athe full SMS/MMS/IM replacement for many.
Exactly this is what could save WhatsApp’s head. WhatsApp has a significant first-mover advantage and was able to mobilize around 15 million users since publication in June 2009. A user base, which will still be impressive when Apple creates millions of iMessage users this fall.
WhatsApp users benefit from network effects: The more of their friends use the app, the better for every user. In this context we also speak of positive feedback: Each additional user increases the likelihood of WhatsApp to attract more users. In extreme cases, so many that the market is dominated by one software product from one company. Microsoft comes to mind. A good example, whose story I will analyze in a later blog post.
That’s the theory. But shouldn’t we just have come to the point where the bosses of WhatsApp pee their pants? Yes and no.
The boys and girls from WhatsApp have demonstrated far-sightedness some time ago and have made the app avaliable for Symbian, Blackberry and Android. And even better, the app is initially free for those platforms. After the first year users have to pay two dollars in annual fees. Also very smart, because after a year of intensive use a strong lock-in effect develops. Switching of the chat app costs money even if they only consist in the cost of lost comfort. WhatsApp can thus generate a cash flow over several years instead of a single payment and multiply their revenue.
The multi-platform strategy will help WhatsApp enormously after the introduction of iMessage. Most of us don’t just have iPhone acquaintances. (To be honest, most of my friends either do not a smartphone or are either unable or unwilling to install a chat app.) Of course Apple has zero interest allowing chats between iPhone and the Blackberry IM app “BBM”. After all, customers shall be bound to their platform, and if possible even convince friends to switch. Which brings us back to network effects.
WhatsApp’s competitive advantage is the far greater potential reach across multiple operating systems. I guess they stand good chances that the decline of revenue this fall will be limitied. Most certainly it would be a good David vs. Goliath success story.
Images: Gustave Doré, Vincent Benedict Castro, Ablo Herrero Isasi