Why WhatsApp’s new subscription model makes perfect sense

Popular messaging and communication service WhatsApp on Wednesday converted its old, one-time payment model on the iPhone(s aapl) to a $0.99-per-year subscription model consistent with its policy on Android. Users will have to toss in an extra dollar every year after the first year they choose to use the app — and it’s a wise maneuver for the company.
The app has an enormous user base: In April, WhatsApp CEO Jan Koum boasted that the company has more than 200 million active users of the service every month. The reason for its runaway popularity lies in its ability to facilitate messages without SMS — instead ferrying communications over data connections and Wi-Fi.
Users take advantage of WhatsApp to text their friends in other countries without paying the exorbitant international texting costs that come with traditional communications. The app is popular in Europe, Latin America and Asia. Installing such a low-cost yearly plan makes it a no-brainer for those who participate in the some-odd 8 billion inbound and 12 million outbound messages that filter through the app every day because it’s still so cheap compared to premium text or roaming charges. WhatsApp, in turn, gets a steady stream of new revenue.
A subscription model could be WhatsApp’s key to netting new customers because it gives them a free taste of the power of the app. The free download may push more people who are considering it to try it, and then the app’s addictive qualities may well push users to pony up the the small subscription fee in year two.
Carriers now may have even more reason to be scared of the app.