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Digital disrupter

Apr 09 2012 10:46 Reuters

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Singapore - US-based software startup WhatsApp, the fast-growing mobile messaging service, denies it's a threat to telephone carriers and the cash they earn from SMS messages.

Instead, its co-founder Brian Acton said in a rare interview that WhatsApp was helping carriers move their customers to data packages that would, in the long term, prove more profitable.

"I view it from the perspective that we're facilitating a broad movement to data plans and the entities that provide those plans are the carriers, so they stand to benefit quite substantially," he said. "It's all about the data."

WhatsApp is the most successful of a number of applications that users can download to their cellphones to share messages, photos and videos.

The applications are popular because while many carriers charge for individual text or SMS messages, WhatsApp messages travel via carriers' generous or unlimited data plans.

According to internet traffic monitor Allot Communications, WhatsApp accounted for 18% of instant messaging bandwidth in 2011, up from 3% in 2011.

There is little question that the growth in applications like WhatsApp is lowering SMS traffic. Stefan Zehle, CEO of UK-based Coleago Consulting, wrote in a blog post in January that mobile operators in Taiwan reported a 12% decline in SMS messages in 2011, a drop he attributed directly to users switching to WhatsApp.

The impact on the bottom-line is stark: Ovum, a technology research consultancy, calculated in a report released in February that operators lost $13.9bn in SMS revenue last year.

WhatsApp doesn't give out much in the way of data. Acton repeated two figures he said demonstrated its stellar rise: WhatsApp handled 1 billion messages a day last October, two years after its launch as a messaging service. Four months later it had reached 2 billion messages a day.

He said that while he was "happy with all countries of the world", growth had been particularly strong in the Netherlands and Spain in Europe, Saudi Arabia and Kuwait in the Middle East and Hong Kong, Taiwan and Singapore in Asia.

WhatsApp is keen to emphasise that it's more than a way to send SMS messages cheaply.

"It's more about the service we provide, including photos and multimedia," said Julia French, WhatsApp's public relations representative.

Acton also emphasised that WhatsApp was available on most mobile operating systems, including not only BlackBerry, Android and iPhone smartphones, but devices running the Symbian 60 software that powers many Nokia phones.

More recently WhatsApp has added applications for Microsoft Windows 7 phones and even the earlier 13-year-old S40 Symbian platform, Acton said. More than 60% of Indonesian phones run a version of Symbian, according to internet measurement website StatCounter.

By aiming at all devices, whether higher-end smartphones or more basic feature phones, WhatsApp offers more than a service like RIM's BlackBerry Messaging, which only works on RIM's own phones, or software, which only works on more expensive devices.

WhatsApp, Acton said, has "created a very accessible network in all countries of the world".

By reaching such a broad swathe of users, WhatsApp is forcing operators to adapt. This is particularly the case in Southeast Asia where SMS has been popular, and hugely lucrative, and where users are price sensitive, said Mar Pages, Singapore-based principal at telecoms consultancy Delta Partners.

"Managing the transition away from high-margin products like SMS is a top priority for most of the mobile operators in the region as part of the wider effort to monetise the data opportunity," she said.

Unusually for startups, WhatsApp does not rely on advertising. Instead it charges users for the application after the first year of use.

Acton said the company had recently reduced the cost of the app on all platforms except for Apple's iOS from $2 to $1. The company has been profitable year-on-year from late 2009, he said, declining to give further details. 

whatsapp  |  smartphones
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