Why we don't sell ads (2012) | Hacker News Reader

Why we don't sell ads (2012)

blog.whatsapp.com

101 pointssamx1876 comments

when advertising is involved you the user are the product

How about: If you're work at a startup where the business model is 'get acquired,' you are the product.

Incidentally, I don't really agree with either of these statements, at least not in their strong forms. The problem with advertising is usually bad advertising. Ads (especially online ads) are usually annoying in inverse proportion to their value. Spam is on the low value & annoying end of the spectrum. 90% of annoyance probably comes from 10% of the value. Regarding privacy, advertising is just the most visible part of something wider and the hidden part of this iceberg is the most worrying.

Anyway, that's besides the point. This "old" blog hints at something sort of hypocritical or schizophrenic about startup culture. On one hand its hackery and lone wolfish and disruptively anti establishment. We can beat you from our basement in our sandals. Hang your cubicles. We don't need bosses or talks from HR departments. We don't need to communicate in corporate speak. There's a hard to deny anti corporate drone streak.

On the other hand, the investment and incentive to found startups is based around the ability to get big fast. Huge. Very fast. Multi billion dollar acquisitions and IPOs in 5-10 years.

Huge means "corporate." Either the startup becomes a huge corporation or their product is put in the hand a big corporation. The real people feel o company where cute memes sound like 'don't be evil' start to sound like "for your convenience…"

I don't have any normative message.

"Anyway, that's besides the point. This "old" blog hints at something sort of hypocritical or schizophrenic about startup culture."

I had a similar thought just reading the title. But then again, as the CEO of Motorola said when I worked there, "Everyone is coin operated to some extent".

You're missing one more part of the issue with advertising: brainwashing. In some ways, I'd rather have a silly, mismatched and ugly ad than an ad that's actually effective at altering my behavior. Pretty much the only situation when I want to see an ad is when I'm looking for a specific product, and there always used to be venues that were very effective at that (specialist press, classifieds, or popular streets where restaurants have their windows). Pretty much anywhere else ads are unwelcome, even if they manage to be "nice", and effectively constitute selling chunks of my brain to get access to Facebook.

And, for the other point, the "tiny, innovative, disruptive startup" is something I've never bought. At best, it's outsourcing the R&D risk, with very few exceptions. So much innovation happens either in academia, or in terrible, huge corporations like Boeing or Stadler.

I'd like to add something to this: we like to believe that we are immune to advertising, but we aren't. No matter how much self control and self awareness we may think we have.

The consequences may not be as grave as they look at first sight, but it's still a very uncomfortable truth. Recognizing my own vulnerability to ads is one of the many reasons why I block advertising.

I personally don't think WhatsApp's goal was getting acquired. I think they got an offer they couldn't refuse, but I don't think they would have sold to a normal valuation.

Remember the internet back when ads were just something you ran across on cheesy low-quality (or porn) sites?

http://royal.pingdom.com/2008/09/16/the-web-in-1996-1997/

http://allthingsd.com/20090720/yahoo-home-pages-over-the-las...

http://www.makeuseof.com/tag/time-10-big-websites-looked-15-...

That's because low quality sites were the only ones that would run the kind of ads we had back then. Then someone built an ad blocker and forced the industry to rethink its approach.

I think you've got your chronology off. Ad blocking was a response to widespread advertising on web sites, not vice versa!

Ad blocking software has only become common in the last five years or so, as web browsers with "extension" support have become widespread. It was very rare before that.

This really isn't so. Ad blocking goes back much further. Here's Ad Muncher v4.7 from 2006: http://ad-muncher.en.softonic.com/ We were blocking ads back in the 1900s.

Internet display advertising dates back to the early 1990s (the first clickable banner ad was in 1993). I can't find any exact information on when ad blockers became widely available, but I suspect it wasn't until at least 2000 or so. I certainly don't remember them being a thing before then.

Most of the early banner ads that have been documented were run by generally reputable advertisers (and on reputable sites), not on the "low quality sites" you're implying. There weren't even very many such sites back in 1993; the Web was a very small place back then.

Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need. – Tyler Durden, Fight Club

That's an awesome quote. Personalized ads (retargeting etc are even worse). I didn't realize this before I worked for an ad network. Once I understood how retargeting works (and also after implementing a humble feature), I realized how unethical it is to constantly tempt the user to buy something he or she can not afford or even if she can afford it, the money she could have put to better use by saving. I resigned from that company after a short stint even though it had a great work culture, great team etc. But had they offered me some crazy stock options, may be I wouldn't have had the moral courage to quit, with an underwater mortgage and financial insecurity.

Most people's morals and ethics, however "religious" and staunch they sound, is up for sale. It's just a matter of finding the right price (as long as what you want from them is not illegal).

I am yet to meet someone whose morals are not for sale. I only know figures like Gandhi but I never got a chance to meet them (and some books told me they were flexible when it came to themselves - re: his wife's medical treatment).

I can find lot of names but I am lazy and one is enough to prove you wrong http://en.wikipedia.org/wiki/Thomas_More

Your parent literally said "most people," i.e. one example is not enough.

And I have to agree. There's a reason the idiom "every man has his price" exists. Certainly, if a large company offered me billions of dollars for a small business of my own, there are relatively few scenarios I can imagine where I'd turn it down.

Bill Watterson

Richard Stallman sounds like a good candidate.

Grigori Perelman

The more I think about the acquisition the more I wished WhatsApp would've stayed on their own. $500 million a year is great. I wish they would've pulled a Craigslist and become more of a cultural institution than another acquisition; focus more on making chat amazing.

I feel like that would've had a larger, net positive effect on the public consciousness. People would see WhatsApp doing it for what's right(don't be evil) then what's profitable and I think that's just a good sentiment to have out there in the aether.

They could've easily, easily taken on the Google/Facebook conglomerate.

> They could've easily, easily taken on the Google/Facebook conglomerate.

Even better that any of these NSA-friendly conglomerates is the ChatSecure App:

"-UNBEATABLE PRIVACY: We keep your messages 100% private using state of the art Off-The-Record (OTR) encryption. Your conversations cannot be logged or intercepted by anyone.

-AD-FREE: We want your love, not your money" [1]

[1] https://guardianproject.info/apps/chatsecure/

I wish they would've pulled a Craigslist and become more of a cultural institution than another acquisition; focus more on making chat amazing.

Well, I guess that when you've raised 58M in funding it's difficult to stay as a cultural institution. Your investors would never allow you to do that.

> "I wish they would've pulled a Craigslist..."

EBay owns around 25% of Craigslist.

Then I wish they would've pulled a VSCOcam or something similar. Albeit they're not a cultural institution yet, they seem to be headed in that direction.

That's a little misleading. It's not like Craigslist wanted eBay as an investor. An ex-employee sold their stock to EBay.

Craigslist isn't about to change their ways because eBay owns a piece of them.

Man, I would put whatever the fuck people wanted on my site if it meant my family and the generations after could live comfortably. That's why I try not to make statements like that.

Even if statements like that help getting your family and generations after to live comfortably?

If you are a vegetarian and you are told to go to a butcher to buy meat, you shouldn't do it out of principle.

When you are WhatsApp and you are against advertising - referencing a quote with great aversion towards it - you shouldn't accept billions from a company who is build on the single premise of advertising.

They have lost all my trust.

"you shouldn't accept billions from a company who is build on the single premise of advertising."

Facebook wasn't built as a way to earn revenue from ads , it was a way for them to monetize on something they built , albeit -- not appealing to the endusers , however it keeps you connected to people in your social circle . Imagine life without the googles and face books of our time

The whole WhatsApp acquisition touches on some of the same personal nerves that Google's acquisition of EtherPad did. It was a really great product that I used daily. At the time Google had big plans for their Wave product, and the entire deal seemed to make sense. Fast forward a few months and Wave is a dud and EtherPad is no more.

I'm not saying that WhatsApp won't be useful to Facebook, but I do think that the philosophy and goal of the two companies are very different. Ads is one potential "technology" that could monetise the product and it's obviously against the founders' philosophy. There will however probably be many other (more subtle) influences from Facebook's side that'll slowly shift it away from the original vision - and promises to users. That's life I guess: take the cash or keep you vision.

https://etherpad.mozilla.org/

Etherpad is now an open source product. In fact, it is still being developed, and is currently being rewritten in JavaScript to run on Node.

Wave as a product no longer exists, however a lot of the technology that Google used has been merged into other products such as Google docs.

The project lost a lot of momentum after Google acquired the developers working on Etherpad. I think the original codebase got forked as the Etherpad Lite project that is still being developed.

While I strongly support any business model that tries to escape from the typical ads monetisation strategy, we can see (two years after this post was published) that not relying on ads has not been the best long-term strategy for WhatsApp for two reasons: 1. They didn't manage to stay independent and had to sell to Facebook. I always thought that they had a very good chance to expand their product and built a platform that could truly challenge Facebook, Twitter, etc. 2. Now that they have been acquired by Facebook, we know that it is only a matter of time before an ad product is introduced into the service.

If they HAD to sell the price would not have been 19B (okay 15 of them are monopoly money but still)

They didn't have to sell to FB they chose to. They had a history of flipping to paid versions of the app to cover costs and reduce growth. Their actual competitors were carriers who charge exorbitant SMS fees internationally. At ~500M users their plan to simply charge $1/yr would have covered their costs.

I don't see it that way. After selling to FB it became clear that hey intended to launch VoIP. If they actually wanted to launch a high-quality product, better voice service than the one offered by carriers (and therefore much better than what Viber has to offer), they would probably have struggled to do it without the help of FB. Every carrier on earth would be against them.

My point was simply that carriers were their competitors, not social networks. How does facebook help them fight?

A carrier would give a lot more thought to disrupting a competitive voice service provided by FB (who already have many agreements with carriers worldwide regarding data usage) than an independent and not particularly well funded (by carrier standards) company like WhatsApp.

This is something that never really sat right with me. How were they going to extract the $1 from every user? Most of their users do not have, and may never have, a credit card and signing up with every cellphone carrier to get your yearly $1 would have been a nightmare. I am not sure they would have gotten $1 out of even every 10 users.

And they could also charge $2 or $3 and people would still gladly pay.

Please add a [2012] to the title. Some stuff has happened since then :)

Most significantly: "Your data isn't even in the picture. We are simply not interested in any of it." - Pretty sure Facebook are interested in it.

I agree. I thought there was some change in the policy given the recent event.

I can't imagine Facebook getting even 10% of their investment on Whatsapp back. It's crazy that they blew so much money on something which hasn't proven to be anything more than a flavor-of-the-day platform. Whatsapp suffers from the same flaw that made Facebook start losing customers to it in the first place: there was a paradigm shift in what the customers wanted in their social apps, and FB always was a touch too complicated for mostly-mobile users' needs. And just like that, the strongest player in the social industry started to decline.

There is zero guarantee that there won't be another such paradigm shift in the near (even super-near) future that would displace Whatsapp overnight. And unlike Facebook, which has tons of features (too many, yes, but that makes it unlikely that someone can replace Facebook with any single solution, which drastically slows down people jumping platforms), they're a one-trick pony banking everything on being SMS, only better. The second something happens and this stops being such a big deal to their users, Whatsapp loses everything. They have no means to ensure long-term user loyalty, they have no other value proposition, they're not ahead of the curve in any other relevant way. If (or rather, when) the Whatsapp bubble pops, FB is left with nothing.

This is simply the cable tv model applied to internet services. Cable went from pay to avoid ads to pay and still get ads (and of course there is Hulu). These guys just figured out how to double dip in a really subtle way.

"When people ask us why we charge for WhatsApp, we say "Have you considered the alternative?""

It must be frustrating for those users who really did consider this and thought $1 per year was a bargain. Over time those users may have convinced their friends to sign up and Whatsapp made that choice easy by being available on a lot of platforms.

Everyone has a price. The only way to really avoid this kind of situation is to push things to be decentralised/distributed or fully encrypted. That's even harder to do (but I'm working on it with a bunch of others - see my profile).

"In the land of the evil the saints emerge..." (and take venture capital to maintain their sainthood along the way).

What works for Whatsapp didn't work for many others and vice versa.

Ads are necessary evil, sort of like taxes. There is a price for Whatsapp's sainthood their very users are paying for with other currencies. One way or another it is an exchange.

Saint my ass.

My assumption is that FB bought Whatsapp for its attach business AKA for its data minning opportunity. I bet they won't throw ads in there, but rest assure that if you're talking vacations with your group "Family", you'll see a suggestion around that via Facebook site/mobile, and so will the rest of your family.

So, I uninstalled whatsapp a bit before the acquisition and have been wondering if they sold my past messages along with their company; I really hope that is not the case. I know draconian EULAs ToCs and "Privacy" Policies are all legal, but I trusted them and prefer to give Facebook as little info as possible.

a reply to myself and to future readers from whatsapp: http://blog.whatsapp.com/529/Setting-the-record-straight

The date at the bottom of the post is: "June 18, 2012".

Sooner or later the ads will come. Even if FB hadn't bought them, that is usually the painful transition most social sites need to go through.

Not if they are paid. app.net is a good example of that.

"Because our business model is to get bought, not becoming profitable."

Users pay $1/year after the first year. At almost half a billion active users that's a pretty great business model.

Only a small percentage of their users have ever paid. Most users get to use it free of charge every year.

Interesting, why is that?

And? The more important information would be the conversion rate of users that have been asked to pay. Whatever it is, they're still miles ahead of instagram/twitter/snapchat ever charging for use.

While this writeup may be meaningless in the long term it's still nice to see in comparison to other apps of the "moment".

How do you do that? I paid. I had no intention of paying until I realised Vodafone Spain charged me 80 cents (euro cents) for a text to my Mum in the UK. A text conversation between us had cost me 8Euros, and some of them were just yes / no replies. After that Whatsapp seemed like a bargain.

It's great, but it's not $19B great.

[edit] Seems my comment is being misunderstood. My point was that FB wouldn't pay $19B unless they planned to monetize beyond the $1/user/year model.

$19B is actually a really reasonable price for Whatsapp if you're FB, though it wouldn't be the same for other buyers. Whatsapp not only has a great business, they posed a direct threat to FB's business. It's a large price/earnings multiple but it's really not outrageous considering.

Edit: responding to your edit:

> My point was that FB wouldn't pay $19B unless they planned to monetize beyond the $1/user/year model.

Maybe. I think it's more likely that the social industry has started to peak, and that we'll continue to see FB at the top, buying off small companies as they become threats. Take a look at the movie industry, or any industry with a traditional "Big 4" group of companies.

WhatsApp was not worth $19B, it was worth $19B to Facebook.

You're worth whatever someone is willing to pay for you.

Not $19B great for _you_.

In other words we can go with your price analysis or with the actual number paid for it. I'll go with the actual number.

A simpler example: Is this bottle of wine worth $200? Maybe not to you...You can make fun of that price. That's cool, free speech, say what you want. But it is selling at that and someone keeps paying that amount for it.

$500M/yr in raw revenue? How do you grow from there? Lower costs? Grow your revenue? Half a billion is getting close to max adoption. Do you up your prices?

I'll stick with just getting $500M/yr. That is more than most start-ups will ever make.

Once I get there I can solve other problems as they come up. Would that be a reasonable approach?

Elsewhere in this thread someone mentioned Whatsapp have $58M of funding, so I doubt it - that'd probably be seen as a huge failure..somewhat amusingly. Let's say them investors want their 10X within a few years so you need to pay them over a year's revenue over a few years with no real growth there - you're paying a lot and they'd probably not agree.

Remember how small Whatsapp is (~50 employees). They don't need to do any of those things to have a fantastic business for a long time to come.

What's to stop a free alternative like Telegram taking all the market? Smartphone adoption is still happening here, and I use the rates are much lower in developing countries. Once word gets around maybe everyone will switch.

Network effect.

The key though is that Telegram actually isn't free to consumers when compared to Whatsapp. At $1/year + access to everyone who is already on network vs. $0/year + access to smaller network+need to invite your friends to build that network Whatsapp is actually (significantly) cheaper. If it was more expensive per year I think they'd be giving some room, but no one is even going to notice getting billed.

Possibly upsell to some premium set of services, or branch out into other business lines. E.g., Amazon's not just a bookstore any more.

Simple phone messaging, not likely.

But where does phone messaging lead to?

• Other comms services (voice, voicemail, teleconference, video). There's room for improvement in all of these. Look at the one stand-out from G+: Hangouts.

• Sales or transactions. From text messaging to commerce-via-text is a step. Or banking. Both are directly monetized.

• Some level of community-based information service with a commercial component. I've long wondered why more of the social networks haven't gone here.

Or, of course, "get bought by Facebook".

I don't think they're close to adoption. There are 7Bn phones in the world and growing. Granted a chunk are corporate which won't ever need WhatsApp, but most in third world countries still use burners.

And although there is likely a slow take up by the elderly, the next generation are all new customers. The 1/5th smartphone ratio can only go up. (This POV is of course assuming WhatsApp wins the messaging war, which is what FB is betting on)

I'm curious do you use whatsapp?

....... Until they got sold to facebook

Selling ads isn't cool.

You know what's cool?

Giving your user info to Facebook to mine and monetize.

Facebook monetizes things by selling ads.

I shiver of fear just thinking that my whatsapp chat data is crossed with the info facebook has from my profile.

The worst is that I cannot convince all my address book list to not use whatsapp anymore.

We are all in a trap!

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