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WhatsApp - Brian Acton & Jan Koum

Owned by Nathan Wailes
Last updated: Dec 01, 2016
16 min read

Questions for them

  • I've heard from several people that WhatsApp got lucky, and the evidence those people offered was the fact that there were numerous competing apps. It seems to me that these people just haven't looked closely enough at the differences between WhatsApp and its competitors. From my research, the major factors I identified were: 1) WhatsApp was out-of-the-gate near the start of when push notifications were released, 2) it was run by owners/cofounders instead of by people who were working for someone else (AIM, GTalk, Skype), 3) it was run by people who had serious experience in scaling systems, 4) it moved quickly to add new platforms. I imagine you have spent time thinking about this issue; do you agree that those factors were significant? Are there any other factors that jump to mind that I didn't mention?
  • What do you think of these people (like the Snapchat founders) who are able to bootstrap to X number of users and then raise enough money to hire good engineers? It seems like it's very important to have good engineers, but that if you're able to find a good opportunity and raise money, that kind of talent is readily available: if you're willing to pay $X, you can be almost guaranteed engineers who will be able to solve that part of the puzzle of building a billion-dollar company. Whereas that doesn't seem to be true of choosing what to build; it doesn't seem like you can just pay $X and be guaranteed that you'll be working on the right thing. It seems to me that there may be more of a lack of knowledge in the Valley around 1) identifying these big opportunities and 2) getting early traction than there is around being able to exploit them once they show early promise. But I may  have an inaccurate view of the situation. What's your take on that topic?
  • The articles suggest that Jan inadvertently created a messaging app, but he started creating the BlackBerry version of that app in may, one month before push notifications were released. Creating a version of the app for another OS would have been a big investment, like maybe $10,000 - $20,000. And there was a lot of press about the push notifications. It seems like jan may have seen this opportunity ahead of time to some extent. Can you shed any more light on this?
  • What was the startup Brian had tried to get going? The fact that Brian didn't immediately start working with Jan suggests that they really didn't see the messaging opportunity ahead of time.
  • My understanding is that there was an initial rush of users in the summer of 2009 that motivated you to join. At that time, it seems Jan had both a BlackBerry and iPhone version of the app out, and only those out (not Nokia, etc.). I'm guessing those versions of the app were set up so that you could send messages between them, is that right? Do you know what the rough make-up of iPhone vs. BlackBerry users those early users were? And since both the BlackBerry and iPhone already had free messaging services (BBM and iMessage), would you agree that those users were primarily motivated by the ability to do free messaging between BlackBerry and iPhone?
  • Do you know roughly how many users WhatsApp had when it released the version that used push notifications to send messages? Was it under a hundred? Or several hundred? Or thousands?
  • How much did Jan pay for the first version of the iPhone app and the first version of the BlackBerry app? What kind of retainer agreement did he have with the developers?
  • IIRC an article said Jan got you to raise $250,000 from friends and former coworkers. I'm guessing that early money was for developer time and SMS fees. How did he arrive at that number in particular? How much runway were you guys aiming for?
  • Do you think Apple had its hands tied w/r/t creating a push-notification messaging service for iOS 3 because of their close dealings with carriers (like AT&T)? Or do you think it just wasn't a priority for them / they overlooked the opportunity?


How you could have spotted the opportunity

  • Look for things that lots of people are paying for, even if it's a small amount ($10-$20 per month).
  • Look for "mediocre players who are tired and have a lot of chips", to use Tony Hsieh's phrase. The carriers were making a lot of money but were mediocre competitors.



  • WhatsApp Blog
    • The first blog entry is August 8, 2009, just two months after push notifications were enabled, and only one month after the first version of WhatsApp to use push notifications.
    • From this blog post it seems that Jan was the one writing the blog entries: the command prompt entries start with "jkb@c123$", and I'm guessing jkb refers to Jan Koum. [Later: Also, this blog post, "Brian and I"]
    • 2012.06.18 - Why we don't sell ads
      • "At WhatsApp, our engineers spend all their time fixing bugs, adding new features and ironing out all the little intricacies in our task of bringing rich, affordable, reliable messaging to every phone in the world."
    • 2013.07.17 - iPhone v2.10.1 release notes
      • "As you know, we used to charge iPhone users a $.99 one time payment, while Android and other platforms had free service for the first year and paid $0.99 a year after that. From now on, we've simplified our business model so that all users on all platforms will enjoy their first year of WhatsApp service for free, and only pay $.99 per year after that. (...) The good news for all current iPhone users is that WhatsApp will be free of charge for the rest of your life."
  • AppAnnie - WhatsApp
  • Wikipedia - WhatsApp
    •  Click here to expand...

      WhatsApp Inc., was founded in 2009 by Brian Acton and Jan Koum, both former employees of Yahoo!. After Koum and Acton left Yahoo! in September 2007, the duo travelled to South America as a break from work.[9] At one point they applied for a job at Facebook but were rejected.[9] For the rest of the following years Koum relied on his $400,000 savings from Yahoo. In January 2009, after purchasing an iPhone and realizing that the seven-month-old App Store was about to spawn a whole new industry of apps, he started visiting his friend, Alex Fishman in West San Jose where the three would discuss "...having statuses next to individual names of the people," but this was not possible without an iPhone developer, so Fishman introduced Koum to Igor Solomennikov, a developer in Russia that he had found on RentACoder.com. Koum almost immediately chose the name "WhatsApp" because it sounded like "what’s up," and a week later on his birthday, on February 24, 2009, he incorporated WhatsApp Inc. in California. However, early WhatsApp kept crashing or getting stuck and at a particular point. Koum felt like giving up and looking for a new job, upon which Acton encouraged him to wait for a "few more months."[9]

      In June 2009, Apple launched push notifications, letting developers ping users when they were not using an app. Koum updated WhatsApp so that each time the user changed their statuses, it would ping everyone in the user's network.[9] WhatsApp 2.0 was released with a messaging component and the active users suddenly swelled to 250,000. Koum visited Acton, who was still unemployed while managing another unsuccessful startup and decided to join the company.[9] In October Acton persuaded five ex-Yahoo friends to invest $250,000 in seed funding, and as a result was granted co-founder status and a stake. He officially joined on November 1.[9] After months at beta stage, the application eventually launched in November 2009 exclusively on the App Store for the iPhone. Koum then hired an old friend who lived in Los Angeles, Chris Peiffer, to make the BlackBerry version, which arrived two months later.[9]

      WhatsApp was switched from a free to paid service to avoid growing too fast, mainly because the primary cost was sending verification texts to users. In December 2009 WhatsApp for the iPhone was updated to send photos. By early 2011, WhatsApp was in the top 20 of all apps in Apple's U.S. App Store.[9]

      In April 2011, the founders agreed to take $7 million from Sequoia Capital on top of their $250,000 seed funding, after months of negotiation with Sequoia partner Jim Goetz.[9] According to Goetz, the venture capital firm originally discovered WhatsApp through an App store tracking system they developed called 'early bird', at a time when the app was much more popular in other countries than in the US. However, it took months for the VC firm to track down Koum and Acton, given that the company didn't have a publicly available address nor signage at the time. All Goetz knew was that they were located in Mountain View, and Sequoia partners "literally walked the streets of Mountain View to see if [they] could intersect with [Koum and Acton]."[10]

      By February 2013, WhatsApp's user base had swelled to about 200 million active users and its staff to 50. Sequoia invested another $50 million, valuing WhatsApp at $1.5 billion.[9]

      In a December 2013 blog post, WhatsApp claimed that 400 million active users use the service each month.[11] As of 22 April 2014, WhatsApp had over 500 million monthly active users, 700 million photos and 100 million videos are shared each day, and the messaging system handles more than 10 billion messages each day.[12] On August 24, 2014, Koum announced on his Twitter account that WhatsApp had over 600 million active users worldwide. WhatsApp added about 25 million new users every month or 833,000 active users per day.[4][13] With 65 million active users, about 10% of the total worldwide users, India is the largest single country in terms of number of users.[14]

      Acquisition by Facebook
      On February 19, 2014, months after a venture capital financing round at a $1.5 billion valuation,[15] Facebook announced it was acquiring WhatsApp for US$19 billion, its largest acquisition to date.[8] Facebook, which was advised by Allen & Co, paid $4 billion in cash, $12 billion in Facebook shares, and an additional $3 billion in restricted stock units granted to WhatsApp's founders (advised by Morgan Stanley), Koum and Acton.[16] Employee stock was scheduled to vest over four years subsequent to closing.[8] The transaction was the largest purchase of a company backed by venture capitalists to date.[7] Days after the announcement, WhatsApp users experienced a loss of service, leading to anger across social media.[17][18]

  • GrowthHackers - WhatsApp
    •  Click here to expand...

      After coming up with the initial idea, Koum was quick to choose the name WhatsApp because it sounds like “What’s up?” and he incorporated WhatsApp Inc. just a week later, on February 24th, 2009—his birthday. But WhatsApp wasn’t always a messaging service. After Koum kept missing phone calls while working out due to his gym’s rule barring cellphones, he came up with the idea of a mobile address book that displayed statuses next to contact names, so that friends could let one another know if they were available or at the gym, in a meeting, had a low phone battery, and so on. Around the same time, Koum’s Russian friend Alex Fishman held pizza and movie nights for the local Russian community—sometimes up to 40 people at a time—at his West San Jose home. On such nights, Koum talked to Fishman for hours about his app idea, and many of the app’s earliest adopters came from this group, including Alex Fishman. Once he’d downloaded the app, he met with Koum at Tony Roma’s in San Jose to go discuss the problems he’d encountered. Though a promising concept, the initial incarnation of WhatsApp tended to crash, and adoption was not instantaneous. In fact, early on Koum confessed to Acton (who had yet to sign on as a co-founder) that he was thinking of giving up and looking for a job. Acton advised Koum, “You’d be an idiot to quit now. Give it a few more months.” [12] As it turned out, Acton was right. It wasn’t long until Apple launched push notifications, which Koum incorporated into WhatsApp. In the newest incarnation, when users changed their statuses the app pinged everyone in their network via push notification. Users liked this function so much that they began using the app to ping one another, at which point Koum realized he had inadvertently created a mobile instant messenger. He explains, “Being able to reach somebody [halfway] across the world instantly, on a device that is always with you, was powerful.”[12] Seizing this opportunity, Koum released WhatsApp 2.0 with a more prominent messaging functionality, and the formerly lackluster user base quickly grew to 250,000—proving Acton right and letting Koum know he was on the right track.  [12]

Timeline of their success

 Click here to expand...
  • 2005
    • August
      • BlackBerry Messenger (BBM) is released.
        • "BBM was very popular in the late 2000s and the break of the decade, before it started to lose out to rivals (iMessage, WhatsApp, etc.)"
  • 2007
    • September
      • Both Jan and Brian quit Yahoo.
        • According to Brian, they didn't coordinate it.
  • 2008
    • June
      • 09 - Apple announces push notifications and says they're targeting a release date of September.
  • 2009
    • January
      • Jan buys an iPhone.
      • Jan talks with his friend Alex Fishman about his ideas for apps.
    • February
      • Alex matches Jan with a Russian iPhone developer, who begins working on an app.
      • 24 - Jan incorporates WhatsApp on his birthday.
    • March
      • 17 - Apple announces iOS 3.0 and says that it will include push notifications. (Source)
    • May
      • 09 - Jan posts in the FlyerTalk forum about WhatsApp. He describes it as a way of sharing your status with others. He mentions a BlackBerry version is under development.
    • June
      • 17
        • Apple releases iOS 3.0, which allows for push notifications. (Source)
        • Apple releases the Messages app. From what I can tell, at this time it still uses SMS/MMS as opposed to push notifications, so users are still subject to carrier fees.
      • 22 - AIM for iPhone releases an update that enables push notification support. (Source)
    • July
      • 15 - Jan posts in the FlyerTalk forum again, announcing the BlackBerry version of the app has been released.
        • If it took two months to develop (May 9 to July 15), and the BB developer was working full-time, that would've cost ~$20,000 if we assume the developer was charging a rate that would earn him $120,000/yr.
    • November
      • 01 - Brian Acton officially joins.
  • 2010
    • "Early 2010" - WhatsApp is generating $5,000/month in revenue.
      • There's no information on where that was coming from; if they were charging $1 for the iPhone version, that would suggest 5,000 iPhone users per month. If we somewhat-randomly assume a 10:1 ratio between iPhone users and other phone users, they were signing up ~50,000 new users per month at that point, which sounds in-line with quote that they "suddenly" swelled to 250,000 users after adding messaging.
    • July
      • Nokia Symbian OS support is added. (Source)
  • 2011
    • February
      • 22 - Group chat is released. (Source)
    • June
      • 6 - Apple announces iMessage, an app that allows users to circumvent carrier SMS/MMS fees.
    • July
      • 12 - Nokia S40 support is added. (Source)
    • September
      • 26 - Windows phone support is added. (Source)
    • October
      • 12 - Apple releases iMessage.
  • 2014
    • February
      • 19 - WhatsApp announces its acquisition by Facebook. (Source)





Articles about WhatsApp competitors ("Why did they lose?")

  • AIM
  • BeejiveIM
  • GTalk
  • Skype
  • Textfree
  • TextPlus
    • 2009.06.04 - CNet - Send free text messages with TextPlus

      • "Lots of apps let you sidestep iPhone SMS to send and receive text messages for free. But in most cases the apps themselves cost at least a few bucks."

      • "free, ad-supported"

      • "Of course, the hassle with any third-party SMS app is that you don't get notifications of new messages unless the app is running. iPhone OS 3.0 promises to allow developers to remedy this problem, but for now the common workaround--and the one offered here--is getting new-message notifications via standard SMS.

        Needless to say, that's not an ideal solution, as you still incur SMS charges for those notifications. But that's par for the course with SMS apps, and you're still able to save on outbound messages.

        Until now, Textfree was my go-to app when my SMS count was nearing its monthly limit. But the freebie Lite version tops out at 20 messages per day, doesn't have a landscape keyboard, and doesn't do group messaging. Needless to say, TextPlus has replaced it."

  • Windows Live Messenger

Articles about push notifications and texting fees prior to Jan/Feb of 2009, when Jan decided to create an app

  • Generally relevant, no specific time
  • Time-specific articles
    • 2008.06.09 - Ars Technica - Ars at WWDC ’08: Live keynote coverage here!

      • -Unified push notification service for all developers, preserves battery life, maintains performance
        -The push stuff scales to many third-party services, one persistent connection needed
        -We have come up with a far better solution, we are providing a push notification service to all developers

    • 2008.08.19 - CyberSurge.org - Apple Pulls Push Notification From 2.1 Beta 4 SDK
      • "Applications like AIM and Twitterrific are dieing for functionality like this since both of them would benefit greatly from being able to send notifications to its users."
    • 2008.09.13 - RobertSDonovan.com - iPhone status screen mock-up
      •  ← It specifically has an example of SMS being one of the push notifications.
    • 2008.11.25 - Gizmodo - Why Is Apple iPhone Push Notification Still Missing?

      • "As any BlackBerry user knows, push services allow the developer to implement functionality that is extremely useful. For example: An instant messenger program would be able to notify you whenever a new message is received, even while the application itself is not running. Think about it just like an SMS. Another example: A voice over IP application can receive a call and alert you right away, so you can pick it up like any normal telephone call. Or maybe return the call using the normal telephony service if you are not in a Wi-Fi spot.

        As you can imagine, this makes push notification a Holy Grail for users and developers alike. The only people who may not be happy about these are the carriers. After all, the idea of an instant messaging application with push notification services taking over their lucrative SMS business doesn't seem like a very good one."

    • 2008.12.28 - NYT - What Carriers Aren’t Eager to Tell You About Texting
      • "the 2.5 trillion sent messages this year, the estimate of the Gartner Group, is up 32 percent from 2007. Gartner expects 3.3 trillion messages to be sent in 2009"
      • "The most profitable plan for the carriers will be the one that collects the most revenue from the customer: unlimited messaging, for which AT&T and Sprint charge $20 a month and T-Mobile, $15."
    • 2009.01.28 - MacWorld - iPhone push notifications: dead and buried, or waiting in the wings?
    • 2009.01.28 - Ars Technica - iPhone push notifications: Apple needs to get them right
      • It is now nearly five months after Apple originally said it would release push notifications for the iPhone, a service that would allow third parties to send instant SMS-style alerts to their applications on the device.
      • The fundamental component of this push system is a single process that can run in the background of the iPhone OS and listen for notifications coming from the server, much like the Mail and SMS apps can listen for messages pushed in near real time. The system is designed to allow third-party applications and services to send notifications to an iPhone (such as when someone IMs you, or pings you on a social network), which would then be displayed in an SMS-like popup that allows the user to either act on the message (perhaps by opening an application) or dismiss them into some sort of a queue for taking action later.
    • 2009.04.09 - TidBits - When iPhone Pushes, Text Message Fees Fall
      • "Text messages cost phone companies nearly nothing to deliver, and yet messages are billed at rates a thousand times their actual expense. This has become well known, even as carriers in the United States have raised pay-as-you-go rates for SMS (Short Message Service) from 10 to 20 cents a pop in the last year. (Randall Stross explained it well in a New York Times column in December 2008.)"

Articles about BBMing prior to 2009

  • 2008.12.24 - CrackBerry.com - So what's the difference between BBM and texting
    • BBM is more secure and doesnt count as texting per ur plan it is data. And can only be done to other BB phones.
    • it won't count towards your text messaging limit (if you have one). If you happened to have friends in foreign countries with Blackberries, you wouldn't get charged for talking to them via BBM, you would with texting.
    • Time wise its about 6 seconds faster to receive a bbm than a txt.
    • BBM uses RIM's servers and NOT the carriers...therefore its FREE...
    • bb messenger is a lot faster and its free where as text messages arent, there u go.
    • with BBM u don't have to give them ur phone number.
    • free text service basically..
    • you can also send voice notes as well.
    • i save like $10 a month because everyone i used to text outside of verizon has Blackberries with at&t.
    • Okay, so one questioned answered. No sms charges for using bbm. However, what if you were to add a friend to bbm who isn't using bbm themselves because they own a Nokia for instance? I know that they will incur sms charges, but will I since I'm using bbm to converse with them?
    •  ← WhatsApp's market opportunity in a nutshell.


Misc articles

  • 2013 - 7Labs - BBM vs. WhatsApp
    • WhatsApp has been a frequent victim of security breaches ever since its launch. According to Wikipedia, WhatsApp messages were initially sent and delivered in plain text; although the issue was addressed later. (...) BBM is well known for its industry grade security from the BlackBerry Team. BBM is more reliable as messages are fully encrypted and only the sender and receiver have the ability to fully decrypt messages.
      • This is really interesting to read because all of the news articles I read after WhatsApp was acquired related that WhatsApp is fully encrypted like it was something they were the first to do.
    • BBM is only available on BlackBerry iOS and Android 4.0+ devices. And with many Android users still running a lower version of Android, it’s evident that these users – along with many other mobile phone users – won’t be able to use BBM at least not for now.
    • BBM and WhatsApp work on completely different business models. If you have followed WhatsApp’s strategy closely, you may have realized that WhatsApp was probably targeted to replace conventional SMS. Maybe that’s why WhatsApp accounts are primarily based on phone numbers. Another interesting fact is that WhatsApp is not officially available for tablets. Even though WhatsApp acts like a normal chat messenger, perhaps it would be more suitable to consider it as an SMS substitute.


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