Parmy Olson: WhatsApp's no-ads promise was too good to last under Meta's ownership

Mint

7 hours ago

Parmy Olson The app's founders Jan Koum and Brian Acton were deadset against ads on this chat platform, but when they sold it in 2014 to Mark Zuckerberg's Facebook (now Meta), they couldn't have expected its new owner not to monetize its eyeballs. But then again, they made big money. And money talks. Founders Jan Koum and Brian Acton were firmly against ads on WhatsApp.
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It's hard to think of a more extraordinary business deal than Facebook's $19 billion acquisition of WhatsApp in February 2014. Its creators were outliers. With a lean staff of just a few dozen people, they had no marketing department, no sign on the door and had spent zero cents from their sole investor, Sequoia Capital.
It's hard to think of a more extraordinary business deal than Facebook's $19 billion acquisition of WhatsApp in February 2014. Its creators were outliers. With a lean staff of just a few dozen people, they had no marketing department, no sign on the door and had spent zero cents from their sole investor, Sequoia Capital.
But WhatsApp had 450 million users, mostly outside the US. Founders Jan Koum and Brian Acton also hated ads. They'd spent a combined 20 years working at Yahoo bonding over their frustration with a business model that sucked up personal data to show us pop-ups.
Building ad systems was 'depressing," Koum told me in an interview in mid-2014. But not too depressing to sell their online chat service to Mark Zuckerberg's Facebook (now Meta Platforms) just a few months later. Eight of WhatsApp's roughly 50 employees made more than $100 million off that deal, while Koum gained a net worth of $6.8 billion.
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Just over a decade later, ads are finally coming to WhatsApp. They'll appear in its 'Updates' (formerly Status) tab, where users post images and videos. Advertisers will also be able to promote Channels there and collect thousands of followers. Meta described the rollout as 'gradual."
Zuckerberg has long been under pressure to monetize WhatsApp, a prominent cash sink whose user base has soared to more than 3 billion but which has yet to pay its own way. Now, with Meta's costly push into AI, including a $14.3 billion investment in data labelling startup Scale AI, the company is moving on the last big piece of real estate it can squeeze cash from. Meta had already begun monetizing WhatsApp through business messaging tools and click-to-WhatsApp ads on Facebook and Instagram, but this is the first time that ads will appear on WhatsApp itself.
Ads fly in the face of what WhatsApp's founders wanted. For a few years after his sale, Koum resisted Facebook's efforts to feature ads on WhatsApp, his co-founder Acton later told me, while Acton himself tried to convince Sheryl Sandberg, then the company's COO, to adopt a metered-user model. His idea was to monetize WhatssApp by charging users a tiny sum after a certain large number of free messages were expended.
Sandberg stuck by the ad model that had already allowed Facebook to print money for years, telling Acton that his idea wouldn't scale. By the time he left the company, Acton knew that he couldn't stop the inevitable. 'At the end of the day, I sold my company," he said.
Still, both internal and public resistance to ads has made Meta's monetization plans for WhatsApp a fitful journey over the last decade. Meta's chief marketing officer Alex Schultz admitted on LinkedIn that the company had announced ads a few times already. 'This time it's for real," he added.
Meta first publicly announced its intention to bring ads to WhatsApp Status in November 2018, then put the plans on hold and nixed them in 2020, before announcing in 2023 that a rollout was back on. The U-turns are down to the staunch views of WhatsApp's founders, who infused company culture even after they vested their stock options and left Meta.
WhatsApp users are also accustomed to an ad-free app that keeps their conversations private with end-to-end encryption. When Meta tweaked its privacy terms in 2021 to add more business-messaging features, many ditched it for rival apps like Signal and Telegram. Meta had to move slowly. Now it's trying to make up for lost time. It will target ads based on users' country or city, channels they follow and how they interact with ads they see on Status or on stablemate apps Facebook and Instagram if their accounts are linked. That's less invasive than the targeting done on Facebook or Instagram, but it's still a form of clutter that WhatsApp's founders abhorred. And Zuckerberg could still push for deeper insights as revenue from Status starts to pour in.
Meta's investors can rest easy knowing the company has yet another platform to capitalize on as Zuckerberg spends heavily on AI. The rest of us have yet another reminder that tech visionaries can sometimes be as naive as they are idealistic.
Sam Altman's efforts to start OpenAI as a non-profit that lived off donations from billionaires was arguably a pipe dream; hence his partnership with Microsoft. DeepMind's Demis Hassabis spent years trying to break away from Google in the hope that it would spin off a valuable AI lab after spending $650 million on it. He was wrong and his company was drawn deeper into Google. Koum and Acton may have also been wrong to think they could sell WhatsApp to one of the world's biggest ad businesses and keep it ad-free. Of course, $19 billion can quieten ideals. In the end, money talks. ©Bloomberg
The author is a Bloomberg Opinion columnist covering technology. Topics You May Be Interested In