At some point, WhatsApp was always going to have to make some money. Facebook paid $21.8 billion for the company in 2014, and since then, WhatsApp has grown to more than 2 billion users in more than 180 countries. And while, yes, Facebook's acquisition was in part simply a way to neutralize a competitor, it also knows how to monetize an audience.
The trick, though, would be figuring out how to do that without putting ads into the app. Nobody at WhatsApp ever wanted to do that, including co-founders Jan Koum and Brian Acton, who reportedly left Facebook after disagreements over ads. More recently, even Mark Zuckerberg has slowed the WhatsApp ad train, with The Information reporting that ads in WhatsApp likely won't come while the company's under so much regulatory scrutiny. So: $21.8 billion, no ads. What to do?
WhatsApp's best answer is business chat. In recent years the app has become a place where millions of businesses can set up shop, and billions of potential customers can browse and buy. Bakeries are taking orders through WhatsApp; airlines are doing customer support; doctors are taking on and seeing patients; people are registering for COVID-19 vaccines. "When you get outside of the U.S. and into some of the countries where WhatsApp is really popular," Will Cathcart, Facebook's head of WhatsApp, told me, "whether or not we build any [specific] tools people use it to communicate with businesses." All WhatsApp realized was that it could make things better, and maybe help everyone — including WhatsApp — make more money.
This presents an enormous opportunity — and an enormous challenge. The opportunity: to build a super-app on the scale of WeChat, one place where users talk to their friends and go to school and order lunch and do their taxes. (For a company like Facebook that's increasingly getting into things like payment processing and cryptocurrency, a super-app is basically a perpetual money machine.) The challenge: to enable all the things businesses want without destroying the user experience or violating the privacy and safety of users. In the last few weeks, as WhatsApp has rolled out a new privacy policy designed to work better for business chat, it has discovered exactly how quickly that can go wrong.
All WhatsApp has to do is walk that careful tightrope, avoid the inherent complications that come with the "by Facebook" at the end of its official name, and become the future of shopping. Simple enough, right?
Connecting to chat
Business-to-consumer messaging has been growing fast for the last several years, as customers look for something better than an interminable wait on hold, and has spiked during the pandemic. The automated chatbot craze has mostly died down, but Apple and Google are both actively offering business-chat services, and Facebook Messenger remains the largest player in the space with more than 80% of businesses in one survey saying they were at least testing Messenger. Messaging is asynchronous, low effort, and happens in the apps where most people spend most of their time anyway.
WhatsApp's thinking about business chat started in 2017, head of business products Ajit Varma told me. "It was very much just looking at how people were hacking WhatsApp, the consumer app." They'd long known that businesses were using WhatsApp as a way to communicate with customers, book appointments, that sort of thing. In countries where most people used the internet exclusively on their phone, some businesses advertised their WhatsApp number instead of having a website.
But as the team dug in, they found businesses using third-party keyboards on their phones to quickly send the same information over and over. They found menu images being sent countless times, taking up valuable storage space on devices everywhere. They had hacky systems for managing schedules, and no systems for managing business hours. All that stuff would be table stakes for a business app, but didn't exist in WhatsApp because WhatsApp wasn't a business app.
It took time for the WhatsApp team to figure out how to best help these business users. One of the product team's early ideas was a feature for setting business hours, which seemed simple enough: Let companies choose hours to be open, and let them create an auto-responder to send outside those hours. Except businesses started to say they were closed 24 hours a day, because they wanted the auto-responder to send out their catalog every time a new person said hi.
Eventually, rather than focusing on productivity or organization or loyalty, WhatsApp decided to focus on pure commerce. It built a better way to do quick replies and away messages, a catalog tool, a shopping cart feature, payment systems, a QR code scanner for connecting to a business and more. Small businesses can use the dedicated WhatsApp Business app, while larger ones use the WhatsApp Business API to add large-scale chat to their offering.
So far, it's working. The WhatsApp Business app has more than 50 million users, and thousands of large companies are set up on the API. Around 175 million people message a business every day on WhatsApp. There are 8 million business catalogs available for viewing on WhatsApp. Right now, WhatsApp charges for some of the features in the API, but could also start adding payment-processing fees and more paid features over time. The flywheel is whirring, and WhatsApp continues to invest in business tools.
And this is where we have to talk about the privacy update.
WhatsApp updated its privacy policy in January. It went … badly.Image: WhatsApp
Terms and conditions apply
In early January, WhatsApp started alerting users to a change in its terms and privacy policy. "As part of the Facebook family of companies," the new policy said, "WhatsApp receives information from, and shares information with, this family of companies. We may use the information we receive from them, and they may use the information we share with them, to help operate, provide, improve, understand, customize, support, and market our Services and their offerings."
This, of course, had been the case since not long after the 2014 acquisition. But WhatsApp was spelling it out for people at a time of deep mistrust for Facebook. People all over the world panicked. Signal picked up tens of millions of new users in only a few days, and WhatsApp's long-held privacy promises were seriously called into question. WhatsApp seemed to be promising it wouldn't share data with Facebook, but it was giving itself permission to do so. And Facebook is not known for turning down user data.
In retrospect, Cathcart said it was mostly a failure of communication. "We remain completely committed to people's privacy," he said. "We will always have end-to-end encryption for people's personal conversations." The privacy update was meant to accomplish something the team thought would be simple: allow businesses to collect a small amount of information about their customers and store it on Facebook's servers. "We're focused on just how we deliver the message to a business," Cathcart said. "We don't collect much data on our users as is, so there's not much to hand over, but even that's not what we're doing. We're just delivering the message." He underestimated the extent to which people care about the privacy of their messages, and maybe also how little they trust Facebook now.
Since that first blowback, WhatsApp has delayed the implementation of the change, and tried to explain it more clearly. But it's still enforcing the change: On May 15, users will have to either accept the new terms or stop using WhatsApp. The company often says that chatting with a business is completely optional, but because there's no separate business version of WhatsApp, the privacy policy isn't optional.
Here Cathcart comes back to the idea that millions of people were already chatting with businesses. He's adamant that WhatsApp remains focused on doing one thing really well, and that business chat fits neatly into the product's core mission. "We're focused on situations where consumers message the business," Cathcart said, "not situations where businesses come in and say, 'Hey, I want to reach a million people with the same message.'" That's called advertising, and Facebook and Instagram are great for that. WhatsApp is more interested in facilitating one-to-one communications. He asked: "How do you make that work really well and better than the alternatives: a phone, a website, email, etc.?"
Simple is hard
One unique feature of WhatsApp is that it's often the first app a new smartphone user will download. Most of the service's growth comes from people getting online for the first time, who don't have the expertise to grok super complicated apps. One reason WhatsApp works so well is that it doesn't try to do too much. Even the idea of adding a Shopping tab to WhatsApp felt too complicated. "We don't want our users to feel dumb," Varma said. "We don't want to tell them what they should be using our app for."
Varma's team, then, is trying to give businesses more tools without compromising the simplicity of WhatsApp. "We're still thinking about, like, how do we convince you, who has never made an online purchase before?" Varma said. "Building a fancy carousel that animates and has AR lenses and stuff is definitely not the core of what we're trying to accomplish." Same goes for businesses themselves, Cathcart said. "I think it's important that on the business side, you build tools that meet the business where they are, and work to their workflows."
Going forward, Varma said, the trick will be to make the tech more complex and powerful without making the experience more complicated. He's thinking about how multi-user shopping might work, for instance — so a family could order dinner collaboratively in a chat — and how to build more automated tools into the system. He sees a hybrid of chatbot and human as the future. "Some questions you can answer with a bot and be close to instantaneous," he said. Users should be able to get their receipt and tracking info automatically, for instance, but troubleshooting or repair questions might require human intervention.
The plan gets more ambitious over time. "In 10 years," Varma said, "hopefully we have a personal assistant that's doing everything for you. It knows who you are and what you like." A lot of companies share that dream, of course. And to some extent the odds are stacked against WhatsApp. The WhatsApp that billions of users love is a dead-simple messaging app that cares about users' privacy. Is it even possible to be those things, and the conversational future of clothes shopping, food delivery, doctor appointments and movie tickets? That's the $21.8 billion question.
