It's now been over five years since Facebook (NASDAQ:FB) closed its massive $22 billion acquisition of WhatsApp, the social networking company's biggest purchase to date. This week, WhatsApp announced that it reached the monumental milestone of 2 billion users, compared to the 450 million monthly active users (MAUs) that the messaging service had at the time of the acquisition. WhatsApp has more than quadrupled its user base under Facebook's stewardship.
The service is Facebook's second 2-billion-user platform, joining the flagship service that now has 2.5 billion MAUs. But Facebook still hasn't really figured out how to monetize WhatsApp.
Committed to encryption
WhatsApp also reaffirmed its commitment to end-to-end encryption, which is part of Facebook CEO Mark Zuckerberg's vision that the future of its platforms will be built on private communications. "Strong encryption is a necessity in modern life," WhatsApp wrote in a blog post announcing the milestone. "We will not compromise on security because that would make people less safe."
In an interview with The Wall Street Journal, WhatsApp chief Will Cathcart said the company would continue to fight for encryption, despite criticisms that encryption at times helps enable criminal activity. Cathcart has been in charge of WhatsApp for less than a year, after his predecessor, Chris Daniels, stepped down last March. Daniels took over WhatsApp after both of WhatsApp's co-founders quit and spent less than a year as the head of WhatsApp.
Law enforcement agencies have argued that encryption makes it easier for terrorists and sex traffickers to cover their tracks, and just this week the National Society for the Prevention of Cruelty to Children penned a letter to Facebook saying that encryption could contribute to an "increased risk of child abuse being facilitated on or by Facebook."
Zuck isn't backing down, though, despite acknowledging last month that "it's going to piss off a lot of people."
Zuckerberg made monetization sound easy
"Our explicit strategy for the next several years is to focus on growing and connecting everyone in the world," Zuckerberg said back in 2014 after announcing the acquisition. "Once we get [WhatsApp] to being a service with 1 billion, 2 billion, 3 billion people, there are many clear ways that we can monetize." At the time, His Zuckness also said he didn't "personally think ads are the right way to monetize messaging."
At some point, Zuckerberg changed his mind and decided to try monetizing WhatsApp with ads that would be embedded in Status posts (WhatsApp's version of the popular Stories format). Following pushback from users, Facebook backtracked on that strategy last month, disbanding the team that was working on integrating ads into the service. WhatsApp is going back to its original monetization plan of connecting consumers with businesses by providing the businesses with a suite of tools and services and charging them. But that hasn't really taken off yet and WhatsApp doesn't contribute any material revenue to its parent company.
Shortly after closing the deal, the tech giant eliminated the nominal $1 annual subscription fee that WhatsApp was charging. Between ditching the subscription fee and backing off ads, it does not in fact seem like there are "many clear ways" to monetize WhatsApp, even after it has reached the scale where Zuckerberg said it would be easy.