What is the true cost of WhatsApp?

The same annual subscription model on all platforms

In a blog post yesterday, WhatsApp announced a new version of the popular messaging app for iOS and the move to a subscription model that has been using on the Android platform. The drop to free means that iPhone users now get to try the app for a year before the first $0.99 payment comes in. Previously, WhatsApp Messenger was a paid app on the App Store, where 99 cents (the cheapest pricing tier available) got you unlimited use for life.

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Despite some initial negative reactions, the new approach means WhatsApp has a business plan that makes some sense. Running a free service at the scale of Twitter can only come with a huge infrastructure cost. It's also fair for the people who helped to kick-start the service: current users are awarded with a "Lifetime" subscription — meaning they'll never have to pay one dollar a year.

The justification of the new pricing scheme on the official statement mentions the absence of ads and other quotes go on the reluctance to offer consumables as in-app-purchases such as games or stickers.

We feel that this model will allow us to become the communications service of the 21st century, and provide you the best way to stay in touch with your friends and family with no ads getting in the way. The good news for all current iPhone users is that WhatsApp will be free of charge for the rest of your life.

The lower barrier of entry means a new set of people will have a chance to get hooked with mobile messaging in the most popular app. This is the same people that for some reason didn’t have access to one dollar on their iTunes account, which sounds like a lot of pre-pre-teens. Think of it as a very long beta period. WhatsApp thinking heads are probably confident that no big disruptor is coming in the next 12 months — no matter how revamped iMessage is, it’s not going to go multi platform any time soon.

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What does this mean for the ecosystem? Giving the service away for free to old users doesn't make immediate sense. It's only when you think of the proportion of the WhatsApp user base of 250 million strong that you start counting the dollars in your head. It has taken less than three years to amass this amount of users as a paid app with the occasional sale (six in total according to AppShopper). Other competitors such as Naver's LINE and Viber racked up 100 and 160 million users respectively in the last counting. Wikipedia lists some Chinese sources saying WeChat had more than 300 million users this year.

Is this enough to lead the pack?

Toying with design ideas for WhatsApp on iOS 7 and the implications of pricing upgrades keeps me thinking. There seems to be an apparent agreement from developers that it's all right to ask to pay for new versions of apps adapted to the Apple's latest operating system. All those shiny mockups looked like the perfect opportunity for the company to charge some money again in the absence of any recurrent payment from you. With WhatsApp changing it's pricing structure, it's uncertain if resources will be allocated to push a new design for iOS 7 specifically rather than support an influx of free non-paying users until July 2014. This is the true cost of using WhatsApp.

Top picture by Jonathan Adami