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Unprofitable WhatsApp may hit Facebook's profitable apps: Mark Zuckerberg

Unprofitable WhatsApp may hit Facebook's profitable apps: Mark Zuckerberg

Wednesday, May 1, 2019 IST

WhatsApp remains unprofitable five years after it was acquired by Facebook for $19 billion.

BENGALURU: Facebook CEO Mark Zuckerberg has admitted that WhatsApp, the popular but unprofitable messaging application owned by his company, may be cannibalising the time Indians spend on its other social media apps, posing a challenge to the American giant in its largest market.

In a conference call with analysts on Wednesday, Zuckerberg also reiterated his stand against data localisation in countries with a weak rule of law, though he didn’t specifically name any.

“You should expect that we won’t store sensitive data in countries where it might be improperly accessed because of weak rule of law or governments that can forcibly get access to your data,” he said. “Our stance on data localisation is a risk. That is, if we get blocked in a major country, that will hurt our community and our business.”

Zuckerberg said that he has been asked if the use of private social platforms such as WhatsApp will replace the more public platforms — Facebook and Instagram.

“As private platforms have grown, in some cases we’ve seen some cannibalisation of the more public platforms in countries like India, where WhatsApp is very popular,” Zuckerberg said. But as the broader pattern across the world shows that people want to use both private and public platforms, “I believe building out this private social platform is a much greater opportunity than it is a risk,” he said while discussing the social giant’s financial results.

WhatsApp remains unprofitable five years after it was acquired by Facebook for $19 billion. While there is no official statement on the reach of the messaging app in India, industry estimates peg its user base at 400 million.

BIG OPPORTUNITY, SAYS ZUCKERBERG

“WhatsApp’s usage and engagement are phenomenal, but I don’t know how it can be monetised. Facebook isn’t as happening as it used to be, but it is still the largest social media network,” said Karthik Srinivasan, a communications consultant and former national lead (social) at Ogilvy.

According to market research portal Statista, Facebook had about 300 million users in India as of January this year, making it the company’s largest market. The number of users stood at about 250 million at the end of 2017.

Zuckerberg said while so-called digital town squares such as Facebook and Instagram will always be important, “over time there’s an even bigger opportunity with the digital living room to build a platform focused on privacy”.

“I think we should focus our efforts on building this privacy-focused platform,” he told analysts.

Currently, Facebook’s News Feed brings in the bulk of the social network’s revenue.

Digital industry analysts are of the view that WhatsApp’s popularity in India lies with people, who are coming online for the first time in smaller towns as well as its usability even in regions with low internet bandwidth.

“Indians have really taken to WhatsApp with free messaging, the ability to easily share videos and photographs, and a lighter application that works in low-bandwidth areas,” said Sanchit Vir Gogia, founder of Greyhound Research.

Facebook, on the other hand, is a heavy application and “has the nuisance of advertisements, and you can’t even decide whose updates you want to see”, Gogia said.

The California-based company has seen profit drop by more than half, to $2.43 billion, in the first quarter of 2019 as the one-time reserve of $3 billion for an expected fine by US regulators wiped out most of its income. It posted $15.08 billion in revenue, up 26% from $11.97 billion in the year-earlier period.