How would you monetize WhatsApp?

Candidate: I assume the goal is to cover the cost of running a business and to fund new r&d intiatives to add new features to the app as well as generate profit from the app?

Interviewer: Yes

Different monetization strategies

A. Free version that is supported by ads and tiered paid version that is based on a usage volume.

The rationale is cost is dependent of the volume of the usage, therefore we need to create different tiers at different rates, to surgically aligns the price with costs.

But the downside, too many options would add a cognitive burden to the users, degrading the sign-up experience, which is important for the user growth. Thus it is not a inferior monetization strategy.

B. Free for personal accounts and monthly fee for business accounts.

The rationale here it is reasonable to take a cut of buisness that happens on whatsapp, still give a free option for personal use.

But the downside, majority of the users are personal users and there is a signification cost associated with supporting the whatsapp platform for personal users. Therefore it is not a viable business strategy.

C. Free version that is supported by ads and paid version for a flat monthly fee.

The rationale here is still provide a free version for millions of price consicous customers, at the same time, give the premium option for the customers that value ad-free experience.

This strategy allows us run a viable business to cover our costs and invest in new features, at the same time, it caters to the different user segments with different needs.

Therefore I would select this strategy for monetizing the whatsapp service.

Develop pricing model

Paid version for a monthly fee

A. Estimate the average cost of supporting a single whatsapp user for a month, use this as a signal for a floor price

B. Estimate the value (in dollar terms) that whatsapp generates for a average user. Use this as a signal for a price ceiling

C. Select a price in between a floor value and a ceiling value, based on the customer survey etc.

Free version supported by ad

A. Estimate the average cost of supporting a single whatsapp user

B. Estimate the average fee for running a ad, it should be informed by the value the businesses are paying on the other platforms such as youtube, facebook, etc.

C. Design a ad frequency in such a way that we generate a monthly revenue equivalent to the monthly fee from a paid user. That way we cover the cost and capture the balanced share of value we create for the users.