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Is WhatsApp making a big emerging market mistake with the no frills strategy?

WhatsApp

WhatsAppYou may have heard over last week that WhatsApp now has about 430 Million active users. Active, not just registered. But that wasn’t the big announcement they made. The more significant statement, a strategy one, was that their founding belief in a no-ads, and no frills – basically a pure messaging platform – ecosystem remains unshaken. They also take pride in the fact that they have achieved these number without themselves spending a dollar on advertising the service.

This is remarkably differently from their emerging competitor, WeChat. WeChat has embraced advertising their service as an awareness and expansion strategy into markets like Asia and Africa. WeChat also believes in advertising on their platform. Not so directly in terms of banner ads and such right now, but they clearly don’t have problems partnering companies that need to use the platform as a channel for business – coupons, payments services, gifts, and the like. Add games to that and you have an anti-WhatsApp!

We’ve wondered here before if this makes WeChat bloated with non-essential frills or if this makes it much more interesting than their competition. WhatsApp’s announcement last week however got us thinking – this may actually be a mistake that this global leader in messaging is making. A ‘no ads and no frills’ strategy may make a lot of sense in developed markets like the US where consumers are tired from decades of spam (in physical mailboxes & email) and advertising, but this may not be the case with emerging markets.

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A year or so ago, a friend made an interesting observation while we were watching the news on of one of India’s top tv channels, NDTV. About every 20 seconds or the channel would have about 5 minutes of ads. Lots of ads. Like 20 or so at a time in rapid succession, maybe 15 or so seconds each. And it was by global companies like Samsung, Canon, Jeep etc… The friend pointed out that they are doing this, not because they are able to get away with it as commercial mode, but because both the advertisers and possibly the consumers watching the TV, probably don’t mind lots of ads.

We laughed that 20 ads in rapid succession on CNN or BBC on the other hand would be unthinkable. Their viewers would revolt!

The reason, we’ve mused, is that emerging markets have a very aspirational consumer base that actually doesn’t mind discovering new stuff through ads and frills stuff. They have newly graduated themselves into a middle class that is increasingly growing but is also increasingly hungry to discover new services, and to consume frills stuff they didn’t even know.

A WeChat, bloated as it may be with games, stickers, payments services and the like, is a actually a great one stop app for these things. WeChat is providing locally relevant content and solutions that never don’t exist in other apps. It’s so much unlike the US or Europe where a matured ecosystem means there’s a dominant (locally relevant) games app that people rely on, a coupons app, a payments service and other such. WhatsApp is right to not want to bloat their app with stuff that’s already done very well by other apps.

This is why these frills components easily go viral in emerging markets. Well, in China for now. But the numbers favour of the future favour emerging markets like China. In terms of population, Africa is a billion. Asia, 4 billion, and South America almost half a billion. North America and Europe no the other hand account for just over a billion. And it makes us wonder if WhatsApp’s strategy is smart into the future.

A big mistake by WhatsApp? Please share your opinion in the comments below.


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24 thoughts on “Is WhatsApp making a big emerging market mistake with the no frills strategy?

  1. Strategy is not about being everything to everyone. It’s about saying no to some opportunities. WhatsApp should maintain their no frills strategy. They can create another separate brand to compete with WeChat, if there is a business case. Adding no frills will dilute WhatsApp’s brand power. 450 million active subscribers tells you that the job that customers hire WhatsApp to do is being done well.

      1. It has clearly been a different experience (dilution of brand that is) for WeChat. So far, adding frills seems to be bringing them numbers. Or maybe WeChat’s brand is not about ‘messaging’, so there’s nothing to dilute?

        1. But then again, Whatsapp has to protect its own brand and that includes keeping to their promise – no ads no frills. Going forth I am sure they will lose some market share, particularly if “localised” like WeChat for China, and others are developed for emerging markets. But on the whole they will continue to dominate. Their service has a unique appeal and standard that will obviously stand the test of time.

  2. “The reason is that emerging markets have a very aspirational consumer base that actually doesn’t mind discovering new stuff through ads and frills” – is this fact or convenient conjecture?

      1. I think your conjecture is wrong. I do not believe anyone enjoys ads, they are only tolerated. Thought experiment: would splicing ‘great, informative’ ads onto those pirated, street-corner DVD enhance or degrade the viewing experience?

        The reason emerging markets are exposed to such levels of media ads is that they are a captive audience, and they don’t often complain/stand up for themselves as much as they ought to.

        1. I personally don’t enjoy ads if overdone… but I also would love to discover new products and stuff via ads so I don’t mind them done in moderation. So yes, the NDTV kinda of ads would make me look for an alternative, but no ads at all, or one short ad every 30 minutes BBC/CNN style is way too little for me to discover stuff. I speak for myself ofcourse 😉

          btw, no, I wouldn’t mind ads on DVDs if they don’t overdo.

        2. Ads are good…obviously they have to be in moderation (not the way they are done at the SuperBowl!!!). But they do provide a lot of relevant information…welll at times… And still you get to learn a lot, branding, strategy, trends… All this in jus a matter of seconds per ad.

  3. The days I am forced to watch an African Movie, I would wish for ads so that I could just stretch my legs!!! Sometimes!

  4. Whatsapp is clean, smart, fast and sleek. The we don’t need ads policy is spot on. Imagine having games and other stuff on whatsapp? It just would kill off the user experience.. I support no bloatware to whatsapp.

    1. We all share that same thought as users.

      But what’s hard to grasp is what’s in it for them? Where’s the catch. They have clearly said their no-ads policy is core and central to their app. Which is why comparing them to WeChat in its revenue making model is futile without knowing their endgame or means to get value from WhatsApp.

      The right questions are… Do they want to make money from it? How, if not by in-app ads?

      I prefer the lightweight, clean nature of WhatsApp 100times more than WeChat, but the question still lingers….what’s really in it for them?

      1. Nothing much in it for them, except with the pricing strategy they have now adopted they will be getting an annual $0.99 per user who joined after June 2013…(not sure on exact month)… Last I checked the company had 45 employees (yes not all of them are developers). So if jus hypothetically 50 million unique user renew their licences, the company earns a huge $50 million, of course they have to leave a bit of commission in the app store, playstore and that other windows store… But still they get to keep a lot at the end.

        1. I think they go into “deals” with companies like this except from Forbes

          “​In addition, though, WhatsApp has started doing carrier bundling deals: a small monthly fee for flat-rate access. Terms are not disclosed but the sticker price is low (just $0.30 per user per month for Reliance in India). I’m not entirely sure how sustainable this is as operators move to bundled tariffs (a subject for a future post), but in any case the revenue per user is also pretty small.” – (http://www.forbes.com/sites/benedictevans/2012/10/19/whatsapp-the-biggest-social-network-youve-never-heard-of/2/)

  5. I think the no ads strategy is actually beneficial to emerging markets. Imagine the amount of data bandwidth that goes with mostly annoying adverts and bloatware not to mention the battery drain from the extra app payload…

  6. I think it’s a matter of target Market. As @kabweza:disqus said in the article, Indian viewers don’t mind ads. Same applies to Chinese IM users, to a larger extend Asian users. These users don’t mind the bloatware as we see it, they are in love with their stickers and games. take a look @ their competitors Line and Kakao

    Now for Whatsapp, i think their strategy is catered for the no frills market the so called developed markets, and the African markets which generally follow the developed market trends. That means cleaner interfaces, less skeuomorphism. I think in that context Whatsapp is guaranteed for success. until design trends change of course. I’m willing to pay my dollar for the moment.

    1. True on us African generally aspiring for the developed market trends. But then again then sometimes I think it’s just a small 10% that want the ‘clean’ apps – the type you generally find on Twitter. It’s also the type that generally hate Nigerian movies coz they are not US-standard quality.
      But despite being hated by this small group, you probably noticed Nigerian movies are hugely popular here. My point being not to measure African tastes by the tastes of this small #twimbo group. The other group is much large and consumer targeting wise, probably more lucrative.

      1. late reply i know, been quite tied up. I guess Whatsapp gamble paid off ( $19bil worth). I think that WeChat(Tencent) will have the last laugh though.,

        as for our discussion.
        lol, i like the analogy with African(Nollywood) Movies, you are right, as twimbos, ( or as i like to put it techno-elite in zim) we tend to see things from a one sided angle, and tend to think we present the views of everyone, because we are assume ” more knowledgeable”, but alas.

        Question now is how do we get that wider % of the populace to pay for services, and how do we deliver relevant ads. Furthermore are the ads relevant to the user, i would like to have ads wjhhich show me where a bag of hupfu costs $3, or which branch of Fishy Inn has a special, etc….

  7. If you have unlimited data then maybe these ads will be wanted. But on a limited plan like most Zimbabweans ads are just annoying. Consuming data for things you dont wanna see

    1. Great point. But maybe we shouldn’t look at it as useless ads eating up the data. maybe more as useful content helping the consumer discover new staff they may want. 😉

  8. Well if WhatsApp would start doing ads, they would increase the data consumption of the APP thereby defeating the whole reason why its such a hit especially in Zimbabwe. Its cheap to use, obviously with the high cost of data we see here, an app on which 1mb can take you through a few days is most welcome. Consider Mxit and 2go, these apps where not so much data hoggers hence their popularity here, Opera mini vs Chrome mobile… etc
    ADS will KILL WhatsApp here

  9. I must also say that it is a very convenient conjecture to say people in the developing countries enjoy ads since they have an aspirational consumer base. I don’t really think it is true. Especially if weChat or Snapchat or other messaging services haven’t made much inroads in India, atleast enough to challenge Whatsapp now, it has to do largely with Whatsapp’s no-ads no-frills nature. People anywhere do not enjoy ads.

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