33-year-old Jan Koum capitalized on Silicon Valley’s blind spot and built the world’s largest messaging platform with $0 ad spend
“I did 9 years at Yahoo.”
Yes, Jan Koum referred to his time at Yahoo as a prison sentence. It makes sense: back when Koum had a Linkedin profile, his last three years at the company were described as “did some work.”
Jan didn’t fit into the Silicon Valley culture. Born and raised in a Communist Ukraine village, Jan moved to Mountain View with his mother at the age of 16. He never really understood the light-minded nature of U.S. school friendships. “In Russia, you really get to know a person,” he said.
“He was very no-nonsense, like ‘What are your policies here; What are you doing here?’” Other Ernst & Young people were using “touchy-feely” tactics like gifting bottles of wine. “Whatever,” says Brian Acton. “Let’s cut to the chase.”
Acton, Yahoo’s employee forty-four, loved Koum’s ‘no-bs’ approach, and helped him get a job at the company. Over the next 9 years, the two would regularly play ultimate Frisbee together. They didn’t yet know they were about to create a $19 billion app.
Koum’s quotes and personal story based on these three sources.
+54 + 9 + [area code] + [subscriber number]
That used to be Argentina’s telephone code formula for mobile calls. If you were in Argentina, and you wanted to call your mom back in the States, you had to solve this little equation every time.
International calls were also ridiculously expensive in 2007, so when Koum quit his job at Yahoo! and decided to travel the world, he wasn’t exactly fond of spending thousands on phone bills just to connect with friends abroad. He had an idea.
The iPhone had just been launched, and these were the pre-Messenger, pre-Instagram, pre-last-active days. Most voice calls would be preceded by a “hey, can you talk?” SMS conversation. The costs of these messages, if you were abroad, added up quickly.
Enter WhatsApp 1.0. Enchanted by Apple’s newly-released SDK and empowered by address book APIs, Koum built an app that displayed user status on mobile phones. Desktop apps like Skype already had the feature (“away,” “busy,” “online,”) but mobile phones had no equivalent.
The idea was that before making a phone call, users would open WhatsApp and see if the recipient is “online.”
“It failed horribly. Like, it was a disaster. It was depressing. Nobody used it.”
“I’m going to a bar.”
Then, on June 17, 2009, Apple introduced push notifications, and it changed everything.
Previously, WhatsApp 1.0 users had to log in to the app to check on their friends’ statuses. It was a ritual you had to perform every time you wanted to call somebody. Too much work.
With push notifications now available, users started actively changing their status — because all other WhatsApp users on their contact list would get notifications. If you were a WhatsApp 1.0 user, here’s what your feed would look like:
James: having lunch. call in 1 hr.
Martha: off to the gym.
Jessica: 3-hour flight.
See how any of these notifications can instantly spark a conversation? Koum realized that people used WhatsApp not to see if other people were online, but to communicate their own activities. He realized that people wanted a messaging interface, not just a status one.
“We noticed that people would use the status as a way to communicate with each other. They would change the status to say something like, ‘I’m going to a bar.’ And the change in status would broadcast to all the other people who used WhatsApp in your address book.”
Building the additional messaging functionality was almost a formality, Koum recalls. He did that, and the user count took off.
Nokia? What’s a Nokia?
Even though WhatsApp 2.0 found its first success on the Apple App Store, it would have never become the world’s largest messaging platform just with iOS alone. Only 68 million Americans use Whatsapp — a minuscule number compared to its 1.6 billion user base.
Koum quickly realized that it wasn’t the iOS-penetrated, English-speaking U.S. market that would form the critical mass of WhatsApp users. Free international messaging primarily appeals to people who have friends and partners abroad — which isn’t America’s strong suit. Americans travel and study abroad less, compared to Europeans and Asians.
Steering away from iOS wasn’t a popular decision in Silicon Valley at the time. CEOs in Pato Alto were quick to argue that Android users are less willing to pay and that the platform was difficult to build on due to fragmentation. These were sound arguments.
Koum, an immigrant and a traveler has seen firsthand that most people outside of the U.S. didn’t own iPhones. They had Samsungs, Huaweis, Xiaomis, Nokias (which had its record year in 2007.)
“Visiting my friends in Russia and Ukraine and Israel, I would see that Nokia was really really popular all over the world. And, for some reason, not in the United States.”
Instead of playing along with Silicon Valley’s iOS-first agenda, Koum was quick to enroll WhatsApp versions for non-Apple devices. He launched WhatsApp on Android in August 2010 (just one year after the initial 2.0 success.) Nokia support was added in August 2011.
“We made a commitment to build on Nokia early on. […] It actually helped fuel our growth in a big way, because there were a lot of Nokia users who wanted to connect and be a part of WhatsApp group chats and WhatsApp messaging with their friends.”
The result was intoxicating. Since WhatsApp 2.0 was launched, it added roughly 328,767 users per day. Most of those users were from India, South America, and Europe.
4 reasons why Jan Koum’s WhatsApp 2.0 sold for $19 billion
Jan Koum’s journey is an embodiment of the hero’s journey in the 21st century. Here are four reasons why Koum’s little project turned into one of the biggest inventions of the last decade in just 5 years:
He had data in the age of data
WhatsApp was never a cash cow. Koum would sometimes turn on $1 annual subscription fees to slow down growth. However, it wasn’t revenue that made WhatsApp such a lucrative purchase for Facebook (which it displayed by making it free for all users) — it was data.
With location sharing data, 65 billion messages sent per day, and access to users’ entire contact lists, Facebook has access to a ton of personal information — all uploaded and saved on its servers. While Mark Zuckerberg has previously promised that this data won’t be used to improve consumer targeting in Facebook ads, it will be unless the user changes the settings to not share information with Facebook. (source)
The picture becomes even clearer when you consider that Koum said he was leaving Facebook because of how they managed WhatsApp users’ data.
He focused all of his energy on growth, not revenue
Silicon Valley’s arguments why CEOs shouldn’t bother with Android are legitimate. Android users will spend less on average. Android is fragmented — both in software and hardware. And yes, perception becomes the reality, and if investors don’t believe in Android, they will be less likely to invest.
But, as Jan Koum has shown, that’s the classic good-is-the-enemy-of-great type of thinking. WhatsApp blew up because it catered to cohorts considered unsexy in Silicon Valley — the non-US, non-English-speaking, non-Android audience. If these users would have no value, Facebook wouldn’t have bought the app for $19 billion.
He was in the right place at the right time
Koum himself is an extremely humble person. He’s the type of guy to say “bless you” whenever someone in the audience sneezes during his keynote, and he’s quick to remind us that he owes a large part of his success to luck.
In 2007, the world was primed to undergo a messaging revolution. Apple had just redefined the word ‘smartphone,’ and while most tech minds were zeroed in on exploring the capabilities of the new iPhone, Koum’s international experience showed him a bigger picture of SMS shortcomings — like ridiculously high costs, limited media support and unreliability.
He relied on customer feedback, not the opinions of his friends
It is nauseating to think about how many inventions never come to be purely because of something someone once said.
For example, when Koum was launching WhatsApp 1.0 — the status app — all of his friends told him that it was a good idea. Nobody told him they’d never use it. Perhaps they didn’t know themselves. Perhaps they didn’t want to insult him.
With WhatsApp 2.0, Koum learned his lesson and relied on customer feedback alone. Group chats, image messages and “seen” statuses were all user ideas — implemented by Koum and his team. Users loved it, and that’s why WhatsApp grew exponentially and never had to invest a single penny into marketing.
5 fun facts about Jan Koum and WhatsApp
- Koum grew up in a household with no running water
- He had to work as a grocery shop janitor to support his mother
- Koum used to buy programming books from a local store and return them
- WhatsApp only had 55 employees when it was acquired for $19 billion
- WhatsApp never spent a penny on marketing
If it sounds sexy, it’s probably not a billion-dollar idea
For me, the main takeaway from Jan Koum’s story is that the biggest opportunities often lie in markets that don’t sound attractive. When the iPhone was launched in 2007, nobody in Silicon Valley wanted to build Android apps for the Indian market. But Jan Koum did, and his achievements can certainly be considered attractive.
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