Lets face it: it’s difficult to be a paid app in India – you’re unlikely to ever achieve mass scale without being free, and even if yours is a paid app, you’re unlikely to have a substantive business unless you’re cheating consumers through automated subscriptions or billing without consent. Whatsapp, probably the largest mobile Internet based messaging app, which had adopted a freemium model and appears to have achieved massive scale in India with its free offering, was never really going to go paid. Instead, it signed a telco partnership deal with Reliance Communications to offer free access (alongwith free Facebook access, SMS at Rs 0.05 each, group SMS at Rs 3 each) for Rs 16/month.
What will make people switch from Whatsapp
The Indian market has a large number of competitors for Whatsapp - Bharti Softbank’s Hike, Imsy, Tencent’s WeChat, Micromax’s Hookup, among several gazillion others – and the Indian consumer would probably switch to one of the free alternatives in two circumstances: a significant outage (which, if you’re a Whatsapp competitor, you should be prepared to make the most of), or a situation where customers have to pay to use.
What Whatsapp is probably trying to do
Whatsapp has deftly addressed the latter issue with a tie-up with its first telco deal in India: it is seeking to both consolidate its position as the leading mobile Internet messaging service in India, and also looking to grow its base with marketing support from Reliance Communications (it’s being marketing on the RCOM homepage for now).
Whatsapp and Telco Relationships in India
Whatsapp will, in most likelihood, try and replicate the deal with other telcos, though it might be tricky: Airtel, the largest telco in India, will have a natural inclination towards Hike, which has been built by a Bharti Enterprises group company BSB; in any case, Airtel is the slowest to move when it comes to partnering for applications and services. My sense is that it tends to hold out for most leverage in a deal, instead of being inclusive and try and grow a user base, unless it can leverage the partnership for marketing and promotion, like it did in case of free Twitter access; especially now that Whatsapp has partnered with Reliance Communications, and Airtel, Idea or Tata Docomo won’t get “exclusivity”, the company is probably better off leaning towards Vodafone India, which has been rather progressive in recent times, trying to help build a mobile Internet ecosystem with better revenue shares for application companies.
There is, of course, the concern SMS is far more lucrative for telecom operators than data, and that is revenue that telcos wouldn’t want to give up. However, the more pragmatic of telcos will agree that it is only a matter of time before instant messaging over data becomes the dominant form of messaging, and if it won’t be one of the apps mentioned earlier, it will be Google Talk or BBM.
What other Mobile Instant Messengers will need to do
Most other IMs should take the Whatsapp example, and try and strike similar telco deals for growing and consolidating their user base. While its inconvenient to use more than one IM, it’s not unusual. This isn’t Whatsapp’s market alone, and there’s still a substantial base out there for the taking. The network effect will favor Whatsapp, which is probably why marketing will become key, both mobile advertising and below the line promotions: targeting college festivals is a good idea in order to build usage from the ground up.
The key question is – how will Instant Messengers make money if the consumer-paid model doesn’t work. Telecom operator partnerships – correct me if I’m wrong – appear to be (at best) a mutual back-scratching exercise. We’d be surprised if Whatsapp is getting any share of that Rs 16 per month, and even if it is, initially, it’s unlikely that that will remain. One way of monetization might perhaps be by pushing content like Imsy does (and Affle tried with SMS 2.0), but that’s a difficult model to scale.