Following Facebook’s $19 billion acquisition of WhatsApp, I met Neeraj Arora, WhatsApp’s head of business development at the Mobile World Congress, last week. Arora, an ISB graduate, had worked in M&A for many years before joining WhatsApp – first at Times Internet, then with Google India, before moving to Mountain View, USA, when Google moved most of its India M&A team to the valley, realizing there wasn’t much in India to buy.
He had joined WhatsApp three and a half years ago, after being involved with acquisition and investment deals for Google. At WhatsApp, Arora has been responsible for inking business deals with telecom operators for Whatsapp, and he spoke with us in detail about why WhatsApp chose Facebook, what will change at WhatsApp post the Facebook acquisition, how discussions with carriers might be impacted, WhatsApp’s dealings in India and hiring plans. He reiterated that, post acquisition, ‘Nothing will change’.
Excerpts from the two-part interview by Medianama’s Nikhil Pahwa:
MediaNama: What’s not going to change?
Arora: Everything will stay the same. The product, the product direction will stay the same. We’re launching voice in Q2, and that is exciting. We still want to do a billion users as soon as possible. Users will come first. You will not see ads, like if you’re thinking that Facebook has a different business model and this might get applied to WhatsApp, that will not happen. We keep our way of hiring, brand, office, and the end user should not see anything that we didn’t plan for them. We are the decision makers even after the deal gets closed. Jan (Koum, co-founder of Whatsapp) is getting on the board of Facebook, and this gives us comfort that this is a partnership.
MediaNama: How does this (acquisition) impact your discussions with carriers, because now they see you differently from before?
Arora: Why do you think so?
MediaNama: Because for them, now you’re effectively a part of Facebook. It changes WhatsApp and its impact. You’re a much bigger player now, in their perception, with Facebook behind you.
Arora: I would say (these) two companies drive a lot of data, especially in the Indian context. It’s essentially good: they (carriers) get a focused relationship in the end, if this is in the bundle (instead of choosing one or the other). It will be easier for carriers to deal with one person eventually, if it happens. It might still happen, but at least for the forseeable future after the deal closes, we’ll have our own separate teams and do deals separately. We are two different products: they (Facebook) are social networking, we’re messaging. Carriers might want to do something more with messaging or more with social…they’re totally different products. That way if carriers think we want to provide one thing to the users, or both or one more, one less. It will depend on that.
MediaNama: How does this change with voice, because it’s one thing to drive data…?
Arora: That is a better question. I would say, if you go back two and half years, when we started doing carrier deals, and this question was asked in every meeting: You want to work with us, we want to work with you, but it cannibalizes SMS. And now I don’t even get that question anymore. I’m predicting that the same thing will happen with voice. We’ll launch voice, and hopefully users will like it…I hope they like it. And, if they end up using our voice product, it drives data, and it will be the same curve again. First carriers will say…
MediaNama: But it’s a completely different thing when you’re impacting around 8% of revenue (SMS) versus when you’re impacting 60-70-80% of revenues, right? The danger they feel is greater.
Arora: To be very frank, I’ve not talked to carriers after this announcement*. I will see how they feel. Jan on stage said yesterday that the future is about data, and there were two more carriers on stage on the same keynote with him, and they also said it’s about data. (If) it’s all about bits and bytes and not about messages and calls, then we’re aligned. This phase from when VoIP is not commonly used to a phase when hopefully everything flows through the data pipe…I’m sure there are lots of smart carriers who are thinking of that transition and planning for it, and pricing correctly. Why does India have such a low data penetration? It should be like 10x of what it is today, and I think we can help that. Google, Facebook, Twitter, these companies provide services that can speed up data penetration, and if we can work with carriers to do it, why not?
MediaNama: Look at what WeChat has: they’re trying to integrate games and commerce solutions. People are already using WhatsApp for commerce, like ordering services. Do you see integration of services, and premium accounts?
Arora: Our philosophy has been very clear from day 1: Anything that clutters the experience is not going to be done. No games, no gimmicks, no ads. With Facebook or without Facebook, that was always the plan.
We’ve always been intrigued by how small businesses have been using WhatsApp. That’s a discussion we’ve had, but we don’t have a plan for it. Anything that adds to the utility of WhatsApp, we’re happy doing. Anything that takes away from the experience, we don’t want to do. Nothing should come in the way of you messaging your friends and family. If you’re promoting games, to us, is a bad idea. (In comparison) My Uber is coming and I get a message on WhatsApp, that’s a utility.
Those kind of ideas, I’m open to, but I don’t have a product timeline for it. We think about it all the time, but the challenge there is – how do you make it happen without spam? If you’re giving access to a third party to message a user, and even if they say that it’s all about utility and they’ll only give messages they want, and it’s opt-in, there’s always a danger that they’ll cross the line at some point and say, 20% off on this. We hate that shit. We would rather not rush into it, and make sure we build a system that is totally clean and no spam, and then opt-in and then think of monetizing it, because if you’re involving a business entity, they can pay for it. It’s something that saves cost for them in the end. They don’t need to have so many call centers, and it’s a great option for SMB’s (small and medium businesses). That idea we’re open to, but we don’t know when that will happen.
E-commerce, games and ads are not going to happen.
MediaNama: Going back to the deal: why Facebook?
Arora: Jan (Koum, co-founder of WhatsApp) and Mark (Zuckerberg, founder of Facebook) talked about it earlier. The visions of the two companies are aligned, even though the products are totally different. The vision is to connect billions of users, and when society gets connected, everyone benefits. If you look at how WhatsApp is being used in small towns, it’s an economic difference to their lives: they can do their business better, they feel more connected with their family. Facebook is doing this with their social networking product, we’re doing with our messaging product. So, Mark and Jan’s vision…they’ve known each other for two years now and there’s a lot of comfort confidence, and trust that we can build an amazing partnership together.
MediaNama: Why not Google?
Arora: Goes back to the same thing. It’s not that we discussed this in an objective way that, lets go meet 5 companies, have a parameter and see who fits. It’s not like that. These things are about person-to-person relationships, company vision, and we felt good about Facebook.
MediaNama: So what made this the right time for the deal? They must have spoken with you before, and overtures from other companies in the past…
Arora: The way the deal was structured as a partnership and not an acquisition, I think was the first time we heard about that kind of idea. It wasn’t that we were looking to hit certain milestones and grow to a certain size. We are never thinking of an exit, as we’ve said publicly before. That was not something that we were looking to entertain. But when Mark and Jan talked, this was like a partnership, our visions are aligned, we can change the world together, it just felt right. At that time it was not about price or timing, it was about “This feels right, lets do it.”
(c) Medianama 2013. This article is brought to you in association with Medianama, the premier source of information and analysis on Digital and Telecom businesses in India.