WhatsApp, from free texting to social network of its own

WhatsApp, from free texting to social network of its own

Over 25 billion messages are sent daily on the popular application, but advertisers are having trouble cutting off a slice of the action.

By Yisrael Fischer | Sep. 26, 2013 | 4:25 PM |  6

WhatsApp, the smartphone app that started as a nice, free application for text messages has become a social network on its own, thanks to the function that allows users to define their own chat groups. Close-knit groups of friends and relatives stay active all the time, and provide updates in real time. Everyone is there, from cousins, to classmates to groups from the workplace and the neighborhood. WhatsApp also presents a problem for Facebook, the world’s largest social-media network. While Facebook offers many more options, when it comes to basic communication, WhatsApp wins hands down, particularly among teens.In an enormous survey conducted in India last June among 17,500 teens, 75 percent said they preferred to send text messages than talk on the phone. Seventy-four percent said they preferred to communicate over a social-media platform than send emails or text messages. More than 90 percent of the teens have WhatsApp and Facebook. Over the past few months, rumors spread that Google was interested in acquiring WhatsApp for more than $2 billion — an impressive sum for a small company that was established only in 2009 and has only about 50 employees. In the past, there were also reports that Facebook was interested in acquiring WhatsApp after its own messaging application couldn’t compete with it.

Last April, WhatsApp reached a significant milestone when it reached more than 300 million users, passing Twitter along the way. As if that were not enough, its CEO, Jan Koum, said then that more than 20 billion messages were being sent over WhatsApp every day — twice the daily traffic of messages over Facebook. Since then, WhatsApp has claimed that the number of daily messages has soared to 27 billion — much more than the number of ordinary messages, which is estimated at roughly 18 billion.

“We’re a society that tries to be efficient — time is money. We put emphasis on multi-tasking and try to be in several places at once,” says Professor Yair Amichai-Hamburger, the director of the Research Center for Internet Psychology at the Interdisciplinary Center in Herzliya, and the author of the book The Social Net: Understanding Our Online Behavior.

“Facebook presents it in a nice way,” he says. “People post statuses all the time. WhatsApp provides maximum effectiveness in communication, but its essence is different in several ways: There’s usually a prior relationship. If you don’t know a person’s telephone number, you can’t connect with him.

“Also,” he adds, “there’s no profile in WhatsApp, no ID that you show the world. There’s no search engine where you can look up a certain person who’s a match for you in one way or another. WhatsApp isn’t built for delayed responses. On Facebook, a lot takes place in a slower, more thought-out way. When you look at shared photographs on Facebook, there’s nothing to prevent you from sharing them again. While WhatsApp is good for family and close friends, it’s no substitute for the public nature of Facebook.”

A huge time investment

Anyone who sits down for a meeting with Gali, 36, a mother of three from Tel Aviv, cannot help but notice that she is there and not there at the same time. Although she’s sitting right there, every few minutes she gets messages, sometimes a chain of them, that take her off into another world. “It’s been like that ever since I got WhatsApp,” she says apologetically. “I have about ten groups at any given moment, and it distracts me and takes me away from reality, and instead connects with people who are far away.”

She continues: “If someone writes something dramatic to you, you can’t ignore it. It’s not polite. And then I can get into a situation where I’m polite to the group, but not to the person sitting next to me.” About the groups that she’s a member of, Gali says, “Some of them are ad-hoc. For example, if we’re going on a trip with a few other couples, we set up a group to figure out where we’ll stop to eat instead of calling everyone. I also have groups of the parents whose children are in my child’s after-school activities. That’s how we organize carpools. There are permanent groups of friends — I have four different groups like that. There are family groups — I have one of my cousins, but most of my acquaintances have more groups like that. I also have two professional groups of colleagues from work.”

That’s a huge time investment.

“Yes, it is. I have a love-hate relationship with these groups. On the one hand, they’re entertaining and practical, but on the other, sometimes I feel like quitting all those groups. But I don’t do it because I’m afraid something will happen and I won’t be part of it. If I ever get divorced,” she says with a laugh, “we’ll be able to say it was WhatsApp’s fault, together with Facebook and Instagram.”

For Yara Diab, an eleventh-grader at Municipal High School No. 5 in Haifa, WhatsApp beats out all the competition on the social-media field. “If it doesn’t happen on Whatsapp, it’s not happening,” she says, and briefly describes one of the interesting media trends of the past year. “I have lots of groups,” she says. “One of them has most of the kids in my grade, or at least my friends — that’s a lot of people. And there’s a group of most of the girls in my grade, and smaller groups just with friends.”

What about Facebook? Don’t you have a class group there?

Diab: “We also have a group on Facebook, but it’s easier to use WhatsApp. I’m more active on WhatsApp anyway. Once, all the chats were on Facebook, but I don’t post photos or statuses there anymore, and I don’t send out text messages. Everything’s on WhatsApp.”

Shira Reib, 16, of Ramat Gan, also knows where most things are happening. “I use WhatsApp a lot more — it’s more accessible to everybody and people are more connected to it than they are to Facebook,” she says. Her friend Noam Rohar goes even further, saying that it takes the place of most of the telephone conversations she used to have, “because it’s much more convenient and accessible.”

While Rohar doesn’t know exactly how many groups she has on WhatsApp, she says, “I’m pretty sure it’s more than 20. Some groups are large, with 30 people, groups from school. Others are smaller, with good friends or the girls from the Scouts.”

Reib is also a member of the Scout group. “Once, I had 1,000 messages waiting for me on WhatsApp, I swear,” she says. “Our group has 30 girls from our class, and all the time there are updates about where we’ll be going, and I have to stay on top of it all the time. I check my messages once an hour.”

A study that the Bezeq telecommunications company conducted this year confirms what the girls say: Israeli teens have reduced their activity on Facebook significantly. They’re willing to give up Facebook applications before they give up the ones for WhatsApp.

But before their parents confiscate their telephones, we should know that the teens use WhatsApp for educational purposes, too. Diab has a class group — and the one who started it is her homeroom teacher, Itzik Shalem, 31. “The Education Ministry has an interface called Mashov — software that publicizes announcements, grades, everything — but my pupils don’t like it. They lose the password, and their parents don’t go into it either. I searched for a platform that everybody sees. If something in class is canceled, they get a message. Before WhatsApp, I had to send out 25 text messages so that everybody would see the message. But everyone has a smartphone now.”

While WhatsApp is a convenient work tool for Shalem, it goes much deeper into people’s private lives. “Sometimes a kid asks me at 11:30 at night what’s happening the next morning. He’s too lazy to check the earlier messages, so he starts a chain of messages that answer him. It’s annoying to have to do work-related things on Saturdays or at 11:30 at night, but I don’t ignore it. Since I’m the one who opened up that channel, it wouldn’t be fair. It’s a choice you make, and you take those things into account.”

Shalem doesn’t dare to mute the class group. “The day I mute it, something will happen, God forbid. I don’t mute my personal groups either. If I don’t feel like being part of something, I see what’s happening and don’t respond.”

Beyond the convenience he finds on WhatsApp, Shalem says that this activity, even though it comes directly from his cellular phone, allows him to respect the pupils’ privacy. “I admit that it was more interesting for me on Facebook, since I discovered their world and I could bring the subjects into class. On the other hand, I could see their personal stuff, and they don’t always think about that when they friend the teacher. Now, when I’m on Facebook less and on WhatsApp more, it’s easy for the kids to define a private space for themselves.”

Headache for ad men

WhatsApp, however, has been a major headache for the marketing and advertising businesses. It’s an almost completely enclosed environment that contains pre-determined, coherent audiences. It’s a dream for any ad man – and they can’t seem to get a foot in the door. “WhatsApp has become the hottest chat platform. People of all ages use it for chatting, exchanging pictures and videos,” said an administrator for the digital department of one large firm. “Large companies are accustomed to monitoring digital platforms, but this time it’s problematic, because they have no access to it. They can’t monitor WhatsApp, or do any kind of marketing on it. It’s the first time in years that there is a dominant digital platform that’s completely closed off to advertisers.”

Is that set to change? Koum says that WhatsApp is not headed in the direction of Facebook and Twitter with regard to advertisements. After an initial year without charge, the application costs 99 cents per year on Android, and other operating systems. Koum saus that “we’re opposed to advertisements,” and explained that because people are so inundated with advertisements throughout their daily lives, his company feels that smartphones aren’t the place for more ads. “Our telephones are so intimately connected to us and our lives. Introducing advertisements onto such a device is a bad idea.”

Nonetheless, advertisers are trying to find a way to utilize the group mentality on WhatsApp to their advantage. Worldwide competitions have been launched, aimed at finding the most exclusive and prestigious WhatsApp groups. The Israeli Café Café company also held such a competition – searching for the country’s best WhatsApp group.

Companies have been founded in the U.S. in recent months, specializing in WhatsApp marketing. The marketing principle is the same as regular text messages, which users are used to receiving from companies.

“If it happens, it will be harmful to WhatsApp,” says Professor Amichai-Hamburger. “It’s not built for marketing messages. Every communication channel is trying to leverage WhatsApp for itself. They should come up with a single economic model for all of them.”

“If adds are introduced all of a sudden, it will be a sever violation of the group intimacy,” continued Amichai-Hamburger.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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