Building on WhatsApp: The Next App Platform

Enjoy the post! At the bottom I’ve included a signup link to a Building on WhatsApp community that we are launching soon. Please share this post with a friend who is interested in Building on WhatsApp.

Over 100 billion WhatsApp messages are sent per day. This is 13x the world’s population, 5x the number of SMS sent per day, and 30% of global daily email volume.

If aliens descended on earth and tried to understand how humans interacted with each other, they might well categorise our communication as predominantly WhatsApp-based species.

But so far the business impact of WhatsApp has been limited. Meta has historically hardly monetised the product. Most consumer companies don’t even have a WhatsApp number. Compared to email, the enterprise value of companies building on the WhatsApp platform is a speck of dust.

But that is starting to change, and is the subject of this deep-dive: how WhatsApp is going to become a business communications platform, and which startups can dominate it. We also lay out our own small contribution at the end of the piece.

So far this topic has been under-discussed, partly I think because of WhatsApp’s relative insignificance in the US (that is the subject of my last post How and Why WhatsApp Will Conquer America), which has left it “out of sight, out of mind” for many.

So although in our view WhatsApp is one of the most exciting technology platforms in the world… nobody seems to be talking about it (for example, it did not make YCombinator’s Request For Startups list). We want to change that.

So let’s dive in. And any Americans reading, you’re going to have to take it on trust that any of this actually matters.

A brief history of WhatsApp

WhatsApp was founded in 2009 by Jan Koum and Brian Acton, both former Yahoo employees. Acton, a Stanford CS graduate from Michigan, and Koum, a San Jose State graduate from Ukraine, had left Yahoo at a similar time and were looking for their next opportunity. Both, incidentally, applied and were rejected from a role at Facebook.

Koum initially had an idea for a status-based messaging service (similar to a Stories format that many consumer apps have adopted today), choosing the name WhatsApp because it allowed people to post “what’s up”. He started hacking something together with a developer in Russia from Acton joined later, helping the company raise its first $250,000 in funding from other Yahoo employees (but receiving a smaller shareholding).

A pivotal moment came in June 2009, when Apple introduced push notifications for iOS apps, and a messaging option was added to WhatsApp’s status updates. Users started to send each other messages (importantly, with read receipts), and the growth from there was rapid. WhatsApp’s technology dramatically reduced the cost of sending a message; unlike email or other messaging protocols, which required files to be stored and ultimately moved across multiple servers, WhatsApp used extreme data compression and deleted messages instantaneously from servers. After introducing a $0.99 annual fee in most regions, this allowed them to remain profitable throughout almost their entire history, with Sequoia Capital’s $58 million invested over two rounds being almost unspent.

When Facebook acquired the company in 2014 for $19 billion, Mark Zuckerberg made a commitment, both publicly and privately, to retain WhatsApp’s principles of no advertising, privacy, and security (this ultimately became a point of contention with the founders, who left and became critical of Meta, with Acton ultimately co-founding Signal, a competing encrypted messaging app).

Since then, the $0.99 fee was removed. Meta, perhaps inspired by WeChat’s rise to one of the internet’s primary access points in China, now has its eyes on a far bigger prize than subscriptions, or even advertising: business communications.

Why WhatsApp makes sense for businesses

Almost ten years post-acquisition, the amount of value created by WhatsApp is one of the greatest of any software product globally; most of the world’s instant digital communications runs on it. But since they made it free for users, Meta captures almost none of this. That is what is starting to change.

In recent years, WhatsApp has invested heavily in B2B tooling, under the umbrella of WhatsApp Business, and their developer infrastructure. Meta now offers various levels of customisability, from simple SME accounts accessible to businesses via a B2B App, all the way to full enterprise-grade software, often facilitated by systems integrators and conversational commerce startups like Yalo. In 2024, WhatsApp will significantly build out these capabilities, giving frontline staff the ability to use their business’s WhatsApp account.

Use-cases include e-commerce (pre-purchase, for conversion), customer care (post-purchase), security (verification, 2FA) and even B2B tooling (we are investors in Jem, an HR platform built on WhatsApp which has grown rapidly in the last year). Some of these can be simple and un-automated, such as simply putting a WhatsApp number on a website and manually responding to messages. Others use WhatsApp’s suite of customisation features, with bespoke buttons in the interface, custom layouts, and even payments (although this has been difficult to roll out for regulatory reasons in most geographies).

Example WhatsApp app flow, from our HR tech portfolio company Jem

In this Jem example, their end-users are developing markets front-line employees, who often do not have access to email, and were previously having their payslips printed and handed to them physically. They also offer leave booking, employee communications, and all the other core features of an HR technology system. Countless other examples exist, from Winedrops which sends daily discounted wine deals via WhatsApp with one-word ordering, to Visito (below), which automates hospitality booking and guest engagement via WhatsApp and GPT, responding with human-like text outputs produced by AI.

Visito AI WhatsApp uses AI outputs for hospitality bookings and guest engagement

It is difficult to know exactly how many companies are being built on WhatsApp because at the moment there’s no community for WhatsApp-based founders. That’s about to change as we will announce at the bottom of this piece.

But why is WhatsApp is such a powerful platform for businesses to engage consumers? Clearly, there is a large installed base, which helps its status as an application platform. But that’s not the only reason. In our mind, there are three less obvious drivers:

  1. Low friction. Unlike email, using a WhatsApp-based app does not require a password. With email login, usernames are publicly accessible, so a private password is required for users to prove themselves. With WhatsApp, the user’s phone number access provides both their unique ID and credentials. This means that WhatsApp onboarding never requires a password, resulting in dramatically reducing friction. Users can click a link on a website and immediately be in a chat with the company.

  2. Asynchronous. Unlike web, where user interactions needed to be completed in one go (or else tabs inevitably get lost), on WhatsApp conversations can be started and picked up later. This makes the conversation more efficient for users, and allows companies building WhatsApp-based apps to have humans take over if necessary.

  3. Personalised with AI. Building 1,000 different versions of a web platform for different users is not possible. However, WhatsApp conversational bots (or humans with instructions) can give users different answers based on who they are and their previous interactions.

These three aspects add up to an extremely powerful application platform, hiding in plain sight.

Meta monetises these customers by charging per conversation, with different rates by geography and category: “marketing” messages are by far the most expensive, followed by “utility”, “service”, and finally “authentication”. For example, a North America marketing conversation is 2.5 cents per conversation; this is high to discourage WhatsApp spam. Service content is priced at less than 1 cent per conversation. A full pricing plan by geography and category is here. If WhatsApp does become an integral platform for paid business communications, this can be worth trillions to Meta.

WhatsApp pricing plan (full details here)

WhatsApp-enablement startups

For every new platform shift, there is the question: why is this good for startups? Can’t incumbents just do this?

For WhatsApp, many have asked the same question. Can’t SAP, Intercom, Mailchimp, and every other legacy SaaS just build a WhatsApp module and dominate this new market?

The answer is no. Not easily, at least.

The beauty of WhatsApp as a platform is that it is a fundamentally different platform architecture to web or email. Because a user’s only credential to access a WhatsApp-based app is access their own phone, this requires a new login ID based on phone number instead of email/password, which is complex for legacy systems to integrate (and in some cases will not be consistent with their security architecture). Also, the user experience is different, outputs need to be stochastic and AI-enabled, rather than static webpages.

For example, let’s imagine that Salesforce decided to build a WhatsApp-based app which sales teams could access to update their accounts. First, this would require a change in the unique employee identifiers from email to phone numbers: most employers do not even know their employees’ phone numbers. And since Salesforce was architected as a desktop-native experience, there is no way the decade+ of custom features would be possible to fit into a WhatsApp mini-app. Users would complain that their favourite widget was missing.

WhatsApp-native architectures have no such problem: the user’s phone number represents their unique ID, and the entire system and feature set is dramatically slimmed-down, designed to fit into a WhatsApp chat experience.

Startups who build on WhatsApp also need to pay per conversation as above, which can structurally reduce their margins. I have met WhatsApp marketing automation companies which send large message volumes have gross margins as low as 30-40% given the cost of sending messages; this is a bitter pill to swallow for incumbents. For startups, however, they either bill this directly to customers, or structure their operating costs around it so that their economics can work.

Building on WhatsApp: the next great platform shift

AI has captured the world’s imagination as the next great technology wave. We have been actively investing in it, and we plan to continue this.

So there is no doubt that AI represents a paradigm shift. But is it a platform shift? ChatGPT is still primarily accessible from a web app, app stores and API. Business AI applications use broadly recognisable interfaces.

WhatsApp may represent less of a technological shift, but it is certainly a platform shift: and a Christensen-disruptive one at that. And, it seems, nobody’s talking about it. To me, that’s worth getting excited about.

At Creator Ventures, we have already invested in two (shortly: three) WhatsApp-native businesses, and they are among the best-performing in our portfolio. We want more.

Payments: the next frontier

Currently, in most geographies, WhatsApp is “just” a communication platform. Friends, businesses, and AI bots can all share messages back and forth. In India, however, the Meta team has gone through laborious regulatory and compliance standards, and turned on WhatsApp Payments (deep-dive from former WhatsApp software engineer Svapnil Ankolkar, who helped with this piece, here).

Payments would supercharge almost every WhatsApp-native application. Currently, WhatsApp apps all need to share external Apple / Google Pay links to process orders, or collect credit card details behind the scenes. Native payments would accelerate commerce, B2B payments, and a host of other use-cases.

WhatsApp Payments turns WhatsApp from an application platform to a super-app. The app, like WeChat, that rules them all.

Finally: a building on WhatsApp community

We have been banging the WhatsApp drum for some time:

If you have got to the end of this post, you might be somebody who cares about the Building on WhatsApp ecosystem. Perhaps you are a founder or investor in the space, or hope to be one day. 

So this one’s for you: we are putting together a Building on WhatsApp community (ironically, on Slack… WhatsApp’s Community product isn’t ready for this yet). This will be a place where founders and investors can share questions and learnings on the API, recommended vendors, product experiments, growth hacks, investments, and everything in between. 

If you are interested in being an early member of this community, drop your information here and I’ll add you to our first members (there are already some founders in there giving recommendations).

Thanks for reading, and please share this with a friend who is, or will soon be, Building on WhatsApp.

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