WhatsApp bucks convention, quietly builds a messaging titan

The group messaging app market has gone through all kinds of changes in the last year with the acquisitions of Beluga and GroupMe (s msft), the introduction of Facebook MessengerApple’s iMessage (s appl) and Google’s Huddle (s goog) and the travails of Kik and its struggles with RIM (s rimm). But one company has quietly built a messaging franchise that has become arguably the market leader while pursuing its own private and unique path.
WhatsApp is now delivering an eye-popping 1 billion messages a day on six different platforms, which it claims puts ahead of any other independent messaging apps. GOGII’s textPlus, for a little perspective, announced in June it had crossed the 10 billion text messages sent milestone since launching in June 2009. WhatsApp is the number one paid social networking app in the Apple App Store, and has more than 10 million downloads on Android with 369,270 user reviews, more than almost any other Android communication app. And it’s used in 250 countries on 750 networks. While the market has consolidated, WhatsApp has kept its head down and continued to execute.

Charging while competitors go free

The Mountain View, Calif.-based company has done this all while flouting some modern start-up conventions. While almost everyone else in the space distributes their app for free, WhatsApp charges 99 cents on iOS and $1.99 on other platforms for three years, with the first year free.
WhatsApp has spent no money on marketing and has actually actively avoided the spotlight, only granting one interview prior to this one. In an era in which entrepreneurs cozy up to bloggers and writers and tout every milestone, update and funding announcement, the WhatsApp team has prized its privacy and is only now starting to open up. And it’s not for attention; they just need more engineers. WhatsApp is almost entirely made up of engineers, who account for 17 their 20 employees. The rest are in customer support.
And the company hasn’t chased venture capital, though that hasn’t prevented it from taking some money. It received funding earlier this year from Sequoia, which it tried to keep private and only now is really acknowledging, though the amount is still a secret. The deal was unsolicited and was primarily strategic, said Jan Koum, WhatsApp’s CEO and co-founder.

CEO and co-founder Jan Koum

Less talk: Let the product speak for itself

It’s sort of odd that an app built around communication is made by a company that has shied away from really communicating its own story. But Koum, who formerly managed operations at Yahoo (s yhoo), told me WhatsApp reflects its founders. Koum and Co-Founder Brian Acton, a former Yahoo VP of engineering, are very product-focused, quiet and private individuals who don’t like advertising. They just like making a product that works.
“It’s less talk and let the product speak for itself,” said Koum. “People appreciate a good product, a stable system. They want to communicate easily and use a product that just works.”
Koum came up with WhatsApp in 2009 following a year off after leaving Yahoo. He initially envisioned an app that broadcasts your status when people can’t get a hold of you. He brought in Acton, who he worked with him at Yahoo and who also left the company at about the same time. The free status update system only attracted a few thousand users, but when WhatsApp added a messaging function in the second half of 2009, it took off. That’s also when the company moved to a paid model. It’s now available on iOS, Android, BlackBerry, Windows Phone 7, (s msft) Nokia S40 (s nok) and Symbian S60.

Financial discipline on day one

Koum said the company has been able to charge because it has created a very robust, clean and focused product that doesn’t display advertising. And he said WhatsApp isn’t interested in using user data to target consumers with marketing messages. He said the decision to turn on a paid system early has helped the company become “cash flow positive,” and it has also allowed them to concentrate on improving the product without worrying about monetization. And they run a cheap ship, squeezing the most out of commodity hardware.
“You have to have financial discipline on day one or you’ll end up looking for that magic [when you] want to get profitable,” Koum said.

Co-founder Brian Acton

Koum said the company still has a long ways to go in improving the product, though he declines to say what’s on the roadmap. But he feels like if WhatsApp can continue to execute on its game plan, iterate quickly and stay focused, there’s no reason it can’t stay at the head of the messaging market. That’s still how he hopes to get the word out about WhatsApp, too: through users enjoying the product and telling others.

Staying independent

While consolidation is likely to continue in this space, Koum said he has no interest in selling and doesn’t talk about those options.
“We want to build a company that endures. We don’t want to build and flip. The space will consolidate more, but we feel uniquely positioned to provide a service that users can enjoy without us being aligned with one player,” Koum said.
I’ve heard other entrepreneurs say the same thing right before they turn around and sell. But the way things are going for Koum and his team, and the way they’ve gone about building WhatsApp, I wouldn’t be surprised if they stayed independent. It would just be another example of a unique company marching to the beat of its own drum.