WhatsApp and the fallacy of zero marketing
In the startup world, there’s a commonly held notion that companies with zero marketing can succeed. In fact, many people believe that zero marketing is the fastest path to a big exit, as it allows the company to devote the majority of resources to engineering and other technology-related functions. Why would anyone spend money on marketing if a “great product” will “go viral” and “attract users on its own”?
The problem stems from the long-held misconceptions and stereotypes of marketing in the startup community. Entrepreneurs, investors and even tech journalists think of marketing a necessary evil that comes in the form of paid ads, spammy growth tactics and annoying PR people, rather than thinking about it as a strategic asset that creates the ideal environment for growth.
WhatsApp did not do zero marketing, because the concept is a myth
The other week, this misconception was on full display when Jim Goetz, partner at Sequoia Capital, announced WhatsApp’s mind-boggling $19B acquisition by Facebook. In his blog post, he described four key metrics that defined WhatsApp’s business. Not surprisingly, the key marketing metric was zero:
0. There may be no greater testament to the viral nature of WhatsApp than the fact that the company has accomplished all this without investing a penny in marketing. Unlike their smaller competitors, it hasn’t spent anything on user acquisition. The company doesn’t even employ a marketer or PR person. Yet like the world’s greatest brands, it’s created a strong emotional connection with consumers. All of WhatsApp’s growth has come from happy customers encouraging their friends to try the service.
To understand why Jim’s point is incorrect, let’s deconstruct:
1. The definition of marketing
2. The role marketing played in WhatsApp’s success
3. The marketing WhatsApp did not do
4. The threats WhatsApp faces by ignoring marketing
1. THE DEFINITION OF MARKETING
At its core, marketing is about connecting companies with people. If your company sells a product or service to a particular audience, then everything you do to make them aware of it, buy it and use it - both internally and externally - is considered marketing. This includes what you do, how you do it, and most importantly, why you do it.
Most people can understand the executional elements of marketing such as ads, press articles or email campaigns. But it’s much harder for them to understand the underlying thinking behind marketing - the strategies, processes and frameworks that help companies view their business in the context of their brand, their audience and their competition. In fact, it’s impossible not to engage in this sort of thinking, though most people do it in a very shallow and simplistic way.
Another important aspect of marketing is that it always comes at some cost. While there are plenty of product hooks and growth tactics like email blasts, social media posts, in-person conversations, etc. that require little to no monetary outlay, the truth is that they still take time to execute. For companies that are typically only a few months away from running out of money, time is an extremely valuable commodity. If you were to quantify the time they spend on marketing thinking, the cost of this function would be a significant portion of the overall business.
Following the same sentiment, marketing rarely happens by itself. Even in the situation where the product does go viral, it still needs continuous love and optimization to adjust to market conditions and audience sentiment. Nothing is ever guaranteed.
2. THE ROLE MARKETING PLAYED IN WHATSAPP’S SUCCESS
So, what kind of marketing did WhatsApp do if the company spent no money on the discipline, hired no marketer and employed no PR person? They actually did a fair amount, though they also left many opportunities on the table. Below are a few examples.
WhatsApp built a marketing foundation by articulating its beliefs
- Beliefs & values: WhatsApp’s founder, Jan Koum, had a very specific view of the world having grown up in a former Soviet country. His beliefs around privacy, specifically in communications, were deeply ingrained in his pysche from a very young age, and those beliefs translated directly into what the product is today (messaging app for small, private networks), how it works (it only requires your phone number to sign up + messages are destroyed from WhatsApp’s servers upon arrival) and why it was made (to facilitate connections between people). Similarly, Jan made a poster that said “No Ads, No Games, No Gimmicks” which espoused the values of simplicity and efficiency. These values and beliefs have permeated the organization and become an important part of the WhatsApp brand, defining the product for years to come.
- Naming: Jan named the company WhatsApp, a play on words of “What’s up?” It was a conscious choice draws connotations of a human conversation and a product that is fun and casual. While it’s arguable that the name is good, but at least there was some thought behind it.
- Audience: It’s known that much of WhatsApp’s traction was outside of the US. The team must have realized that one of the most receptive audiences were people with families and friends living outside their home country, which made the cost of SMS prohibitively high. Jan’s own experience coming from a foreign country help to solidify this notion. The team must have spent a lot of time thinking about identifying their ideal customer (a core marketing function) and testing their hypotheses in market.
- Go to market strategy: WhatsApp had to seed its product in some way to get it off the ground. I would guess that this was done through a combination of in-person conversations, social events, emails, social media promotion, forums (including Jan’s favorite, FlyerTalk) and a variety of other low-fi tactics. Every small interaction was important because it gave the business a higher chance of success, even if it was only by adding one additional user.
- Pricing: In the early stages of the business, WhatsApp decided to charge $0.99 for the app to signal a premium position in the market and to differentiate itself from the myriad of free competitors. Later, the company changed its model to free for a year + $0.99/year after, when growth became a priority. This was most likely done through a mix of observation, intuition and testing.
- Product design: The team designed and built a product that met a specific set of customer needs, namely communicating with a close network in a private way, at essentially no cost. To ensure the product had a good market fit, the team had to decide which features to build, which not to build (a recurring discussion among the team. as the graphic above suggests) and how to prioritize customers’ needs, presumably with their input. They also chose a design aesthetic that underscores simplicity over everything else. These decisions were not arbitrary, but rather grounded in set of human insights and assumptions.
- Analytics & optimization: Someone on the team must have spent time analyzing the app’s usage numbers to see what worked best and what didn’t, and conveyed those findings to the product team to make the experience better.
In many of these examples, it’s likely that CEO Jan was leading WhatsApp’s marketing efforts, and rightfully so. The CEO sets the vision of the company, recruits and motivates employees, promotes the company to customers and investors and directs the broader vision of the product. If there’s one C-suite role that can assume the marketing function, it’s the company’s leader.
But even with other team members contributing, it’s clear that a lot of marketing was done at WhatsApp, at a significant cost to the team’s time. It’s impossible for the company to get to where it is today without this investment.
3. THE MARKETING WHATSAPP DID NOT DO
Despite the marketing activities that WhatsApp engaged in, there are many others that it overlooked. Below are the most important ones. While some of them are already causing the company problems, others will become problematic in the near future.
WhatsApp’s About page is a reflection of its shallow marketing thinking
- WhatsApp did not develop a strong brand. While WhatsApp has some of the basic elements of a brand (namely, its beliefs about privacy and simplicity), it never really engaged in formal brand-building activities. For example, the founders stayed out of the media spotlight, they didn’t voice their beliefs in a public forum, they didn’t actively connect with their audience and they didn’t set up a social media presence. As a result, they missed an opportunity to cement their proposition in the minds of customers, beyond building general awareness.
- WhatsApp did not create a deep emotional connection with consumers. It’s disingenuous to lump WhatsApp with some of the world’s greatest brands (many of which it took decades to achieve this status), claiming that the company created a deep emotional connection with its consumers. Emotions are a powerful tool in the marketing arsenal, but simple preference (I prefer WhatsApp over company X) in no way equals passion. Who can really say they’re a diehard WhatsApp fan, ready to follow the company blindly as some do for app like Path and Foursquare (despite their limited success), and more importantly, brands like Coke, Nike, Apple, BMW and Pinkberry? I would guess that the number is very low. WhatsApp limited its connection with people by positioning itself solely around utility and efficiency, while leaving little room for personality, self-expression and other emotional triggers.
- WhatsApp did not react quickly to people’s needs. A prime example of the company not being in touch with its customers is the very late release of its iOS7 app (more than a month after the OS went live), which drew widespread criticism and frustration. Once the new update was finally released, it didn’t live up to expectations. Behaving this way is very dangerous, especially in a mobile ecosystem known for fickle behaviors and low switching costs.
- WhatsApp did not protect its key differentiators. If WhatsApp pioneered privacy and simplicity in mobile messaging, then the company is letting competitors beat it at its own game. Apps like Telegram and Threema are using features like encrypted messaging and uber-simple interfaces to stand out in the market, and their message is resonating with customers. On the backdrop of WhatsApp’s server outage, for example, Telegram has claimed a mind-boggling 5MM new users per day, an indication of people’s indifference to WhatsApp.
- WhatsApp did not prepare for failures. WhatsApp was lucky to survive the last few years without any big server outages or privacy breaches. But what would the company have done if something bad happened? A mere two years ago, Airbnb found out the hard way and quickly introduced an insurance and protection plan for hosts. Now, just days after its acquisition, WhatsApp is facing heavy criticism after a 4-hour service outage - something that a status account on Twitter alone won’t help to mitigate.
Many of the marketing initiatives discussed above do not necessarily require a lot of time. They do require awareness, thought and buy-in from the founders. If the culture of the company is to disregard marketing until things stop being rosy, then it will have already too late to turn back. There are simply too many messaging apps on the market for people to stick with a company that doesn’t invest in them.
4. THE THREATS WHATSAPP FACES BY CONTINUING TO IGNORE MARKETING
Over the next few months, WhatsApp faces many marketing challenges that product features alone will not solve. To navigate its way around the fast-moving market, the company will have to modify its business approach from one that is indiscriminately focused on user growth to one that is rooted in a deep understanding of its audience, market niche and brand.
One of the company’s imminent challenges is protecting itself from the negative perceptions of Facebook. Facebook is commonly regarded as an antithesis to privacy through business practices like invasive user profiling and the sale of personal data to advertisers. These perceptions run counter to Whatsapp’s culture, so how can they be reconciled? And how much can Jan really influence Facebook by joining the company’s Board? The WhatsApp brand is thin already, so the company needs to take a bold stance to reinforce its beliefs and promise to customers.
Another challenge is rising above the noise of competition from companies like Telegram, Threema, Line, KakaoTalk and WeChat. These are no longer the amateur messaging apps that WhatsApp competed with in Botswana, but world-class, refined apps with deep pockets and large consumer followings. Are utility and functionality enough to differentiate WhatsApp the more these companies claim to have better or equal product features? What is the company’s unique benefit - functional and emotional - and how will that change over time?
Lastly, WhatsApp will need to address its customer happiness. What reasons will the company give its customers when they’re exposed to competing messaging apps? Will it develop new ways to enhance the experience, or will it simply try to develop competitive measures to slow down switching? One thing is certain - hiding away in the comfort of WhatsApps Mountain View offices is not an option.
Looking at WhatsApp’s path to success demonstrates that the company did plenty of marketing, even if it lacked a dedicated person for the function and spent no money on the service. The company articulated its values and beliefs, defined its audience, go-to-market strategy and pricing, built a product to meet those needs and optimized it based on customer feedback. While the team did not spend a lot of money on the marketing function, it certainly invested time in the process.
Nonetheless, the company’s investment in marketing was not enough, and today the company faces more competition than ever before - much of it exploiting the weak perceptions its developed in the minds of customers. If WhatsApp is to continue on a path of success, it should stop celebrating its marketing deficiency and instead focus the organization on serving its customers’ needs in a more focused way. The company needs to place a stake in the ground with much more conviction than it has in the past, and build features, services and marketing programs that support a unified message.
WhatsApp succeeded despite its lack of marketing, not because of it. Let’s hope the company distances itself from the notion of zero marketing sooner rather than later, otherwise it will follow the steps of other fallen startups who thought they could succeed in a human business with technology alone.