Most people weren't actually paying. Apparently, the vast majority of users were granted free lifetime memberships (see comments here [1] and article here [2]). When Facebook acquired it, it only had $10 million in annual revenue [3] against 450 million users. Clearly, most users were jumping on board during times when it was made available for free.

[1] http://www.idownloadblog.com/2013/07/16/whatsapp-goes-free/

[2] http://www.iphoneincanada.ca/recommendations/whatsapp-messen...

[3] https://www.recode.net/2014/10/28/11632404/facebook-paid-19-...

Do you need more than $10M/year for 450M users? As I've said in another comment they barely stored anything server-side and it's known they have a very optimised stack

You do if you’ve been acquired for $19 billion. The founders couldn’t have been naive enough to think that Facebook and its shareholders didn’t have a need to monetize such an enormous investment. Facebook is not a charity, it’s a business.

Facebook monetizes Whatsapp by limiting its growth. You can easily think of all the “social” functionality Whatsapp could have added in competition with FB and Messenger.

Facebook paid 19 billion to buy up competition, as WhatsApp was a threat to the Facebook ecosystem.

That is what I am seeing now here in India, folks in my circle barely post anything to facebook now, all pictures, status messages are on WhatsApp now.

If FB pays $19B for every messenger competitor that gets traction, that's a huge incentive to make more of them.

There are network effects at play; so once a messenger has locked-in most users, it's extremely hard for newcomers to gain sustainable traction.

yeah but now you have to compete with WhatsApp to get that traction, so maybe a hard slog.

And if FB shut down WhatsApp, users will be looking to go elsewhere, and probably not FB Messenger.

Let’s say you figure out how to run a company with 100M customers with only five employees.

What stops me from getting together a few friends and stealing your business model?

At some point you have to add value just to keep the wolves at bay.

...So you'd try to solve the same problem with a different sticker to score quick cash?

I'd like you to read this and contemplate.

http://www.catb.org/esr/writings/unix-koans/ten-thousand.htm...

If you didn't bother reading and contemplating, here's the gist:

There is no wolf to fear. We are all finite beings with finite time and resources. You 'stealing' his hypothetical business model doesn't really accomplish anything except tie up your resources retracing his steps. You would be the fool reimplementing the pipe.

Now if you are the type of person who reduces life down to only pursuing the almighty dollar rather than trying to solve difficult extant problems... Well... Maybe that would be worth it to you. Even then though, he has already captured his audience, and he'll likely have a reputation advantage over your copy.

Anywho. Food for thought.

> Let’s say you figure out how to run a company with 100M customers with only five employees.

That's not how it works. I'm pretty sure you and I could write a Snapchat clone in a weekend. This doesn't imply we'll ever reach 100M users.

You could write a Snapchat “clone” but not with anything close to its performance. Snapchat has to be the most performant app I have ever seen.

Is this new? I tried it out a couple years back on a decent spec phone and it was the slowest app I've ever used. I'm pretty sure Snapchat the app was known for being sort of a wreck at some point. My daughter still put up with it but it was painful to watch her use it.

I have a fairly high end Android phone (OnePlus 3) and Snapchat freezes up all the time. Video pretty much always stutters without fail. IIRC it was the same on my Nexus 5 as well.

Network effects?

Red Queen effect

Tremendous network effects and extremely high retention

Hosting is pretty far down in the list of operating costs for a business. Employee salary, benefits, marketing etc. is where most of the money goes.

WhatsApp had 55 employees and I'd say it had no marketing to speak of.

55 * $100,000 is already $5.5 million. Revenue of $10M/year seems pretty tight to me, for a 55 person company.

Not to mention the video someone posted beloew from an engineer talking about Erlang there in 2014 has some interesting numbers. Christmas/New years is peak, and on Christmas Eve they were maxing out at 146GB/s out.

If we assume they maybe averages 75% of that over 6 hours, that's 146Gb/s * (60606)s / 8bytes/byte * 0.75 * 0.05dolars/GB = $14,782.50 for a 6 hour period (estimate).

That's highest listed bandwidth tier price for Azure, I'm sure they would pay less for a number of reasons. But let's just say that $10k for a whole day may not be out of the realm of possibility. That puts bandwidth costs possibly North of $3 million a year. Even at $1 million, that's a lot of money.

Ok but a serious company wouldn't pay per byte if they were trying to save money. They could buy that much connectivity for like 50k a month. (Though they'd need to get some switches and have a network engineer.)

And if that's audio/video Vs just text, clever NAT hole punching techniques could reduce it if truly needed.

But, it seems WhatsApp was on SoftLayer? In that case their costs might have been vastly higher.

Real costs per employee are 2-3x the salary anyways.

I find that hard to swallow for a small company size, such as being discussed here. Do you have a reference or some reasoning to support this? I'm interested to know where it comes from.

Benefits, office space, equipment, T&E, employment taxes, etc. This is an old article but it suggests about 2.7x. [1] I agree that it might be less for a startup assuming a frugal startup but it's probably at least 2x salary on average.

[1] http://web.mit.edu/e-club/hadzima/how-much-does-an-employee-... (This is old but nothing really substantial has changed except.)

I'm not sure a ratio-to-salary is the best tool here. I mean, why would a developer on $150,000 have twice the healthcare cost, or office space cost, or equipment cost of one on $75,000?

It’s just a rule of thumb and some costs do roughly scale. I’m sure there are more sophisticated calculators and spreadsheets for this sort of thing.

I'm assuming you don't run a business. 2-3x sounds in the right ballpark to me.

Why is everyone making 100,000?

That is a very conservative mean all-in cost per employee for a group of professionals. Edit to add: in the US that is.

Yes. That implies the average salary is almost certainly <$50K and maybe more like $35-40K.

Because they are developers?

Developers would cost way more than that, especially if you factor in taxes.

I started paying before they were bought, I might even have paid twice and I loved it. Would happily paid for a few famuly members as well.

Also there should be a huge possibility to increase revenue by selling API access (think appointment reminders etc as well as the whole bot ecosystem).

When Telegram started they talked about price and I think I remember being unconvinced. I wanted to pay. As we (used to) say here on HN: if you're not paying you are the product.

(Of course now we have learned that some companies charge us and still sell our (meta)data and advertise to us.)

They did a great job avoiding taking too much funding though!

In 2015, when WhatsApp had ~1B active users, Facebook said that the overall revenue from it was insignificant enough they they were just making it free. I'm pretty sure it wasn't charging the vast majority of users (which is how it got popular in developing countries in the first place).

> Facebook said that the overall revenue from it was insignificant enough they they were just making it free

Have you considered that Facebook might not be telling the whole truth?

"insignificant" compared to what, how much money Facebook makes off of every extra user (who wouldn't want to pay) on their platform? Making it free can only be a profitable move because of what Facebook could do with the data, not because a few million dollars a year is truly "insignificant".

Articles I read when Facebook bought them said they were losing money. Most reports I just Googled were subscription only or plastered with ads but here's financial sheets:

https://www.sec.gov/Archives/edgar/data/1326801/000132680114...