WhatsApp's ‘no ads' promise meets Meta's reality
IT'S hard to think of a more extraordinary business deal than Facebook's US$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 had 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 chat service to online ad magnate Mark Zuckerberg, chief executive officer of Meta Platforms, just a few months later. Eight of WhatsApp's roughly 50 employees made more than US$100 million off that deal, while Koum gained a net worth of US$6.8 billion.
This week, 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', suggesting WhatsApp users will start to see ads over the coming weeks and months.
Zuckerberg has long been under pressure to monetise WhatsApp, a prominent cash sink whose user base has soared to more than three billion but which has yet to pay its own way. Now, with Meta's costly push into artificial intelligence, including a US$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 monetising WhatsApp through business messaging tools and click-to-WhatsApp ads on Facebook and Instagram, but this is the first time ads are appearing inside WhatsApp itself.)
Ads fly in the face of what WhatsApp's founders wanted. For a few years after his extraordinary sale, Koum resisted efforts inside Facebook to feature ads on WhatsApp, his co-founder Acton later told me, while Acton himself tried to convince Sheryl Sandberg, then the company's chief operating officer, to introduce a metered-user model. His idea was to charge users a tiny amount, perhaps a tenth of a cent, after a certain large number of free messages were expended and monetise WhatsApp that way.
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Sandberg stuck by the ad model that 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 been enough to make Meta's monetisation 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 back in November 2018, then put the plans on hold and nixed them in 2020, before announcing in 2023 that the 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 a clean, ad-free app that keeps their conversations private with end-to-end encryption. When the company 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 sister 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. According to Schultz, 1.5 billion users visit the feature every day.
Meta's investors can rest easy knowing the company has yet another platform to capitalise on as Zuckerberg spends heavily on AI. The rest of us have yet another reminder that tech's most important visionaries can sometimes be as naive as they are idealistic.
Sam Altman's efforts to start OpenAI as a nonprofit that lived off donations from benevolent billionaires was arguably a pipe dream, hence his eventual partnership with Microsoft. DeepMind's Demis Hassabis spent years trying to break away from Alphabet's Google, believing the search giant would be willing to spin off a valuable AI lab after spending US$650 million on it. In the end, he was wrong and his company was drawn deeper into Google.
Koum and Acton were similarly guileless to think they could sell WhatsApp to one of the world's biggest advertising businesses and avoid ads. Of course, US$19 billion can make even the purest ideals go quiet. In the end, money talks. BLOOMBERG
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