Why Facebook buying WhatsApp is good for #VRM

WhatsFace is a huge deal for VRM, but not just in the ways we’re hearing about so far.

For example, Henry Blodgett is right that Facebook paying $19 billion dollars in cash and stock for WhatsAppis a bargain. Hey, WhatsApp is a real business with a half-zillion customers, growing at a phenomenal rate, and a great platform for more revenue models. Sarah Lacy nails this point too, and adds wisdom about valuations.

And Xeni is right that “dominance in the developing world” is another big reason why it’s a smart move. Josh Constine and Kim-Mai Cutler at TechCrunch agree. (Great chart there, though SMS needs to be in it too, because it would still dwarf everything else.)

And lots of other folks are also right to say that WhatsFace will be a threat to Amazon, Apple, Google, mobile carriers and other big players.

But Zach Seward in Quartz scores a #VRM bulls-eye with WhatsApp’s anti-ad philosophy is really a broad new vision for mobile. He brings me in too, with a quoted blast from the distant past:

But there’s something else, more fundamental: a disquieting suspicion that, in the long run, advertising simply might not work for the mobile web.

“No one wakes up excited to see more advertising, no one goes to sleep thinking about the ads they’ll see tomorrow,” Koum wrote in 2012. It echoed a prophesy that writer Doc Searls made about the web all the way back in 1998: “There is no demand for messages.”

Of course, Searls wasn’t talking about the kind of person-to-person messages that WhatsApp specializes in. Rather, he was pushing the idea that the internet would lead to the erosion of mass media where messages—think corporate marketing or political messaging—could be imposed on people no matter what. That happened to an extent, but most of the web’s big businesses—Facebook chief among them—can fairly be described as mass media. At any rate, they have been successful selling ads.

What if things are different—and much closer to Searls’s vision—on the mobile internet? Koum certainly thinks so: ”Cellphones are so personal and private to you that putting an advertisement there is not a good experience,” he said last year. He has described mobile messaging as a utility akin to water or gas.

Or perhaps, well, a phone company. After all, WhatsApp transmits 18 billion messages a day, but doesn’t send any itself.

I wrote that line a year before Chris Locke, Rick Levine, David Weinberger and I put up The Cluetrain Manifesto. But, even though Cluetrain is best known for the line “markets are conversations,” its most radical and prophetic clue was actually this one, by Chris:

It was for lack of “dealing with it” — business welcoming free and independent customers — that I posted The Intention Economy in Linux Journal in March 2006. It’s also why I started ProjectVRM later that same year — and why I reported on VRM work in The Intention Economy: When Customers Take Charge (Harvard Business Review Press, 2012). There are now more than 100 listings on our VRM Development Work page. The creation of WhatsFace just made that work much more valuable. Here is why I think so.

It’s a worldwide millennial thing. As Xeni pointed out, many or most of Whatsapp’s half-billion customers are in geographics and demographics where Facebook is post-peak. These people communicate primarily by text and hate paying the extractive fees required by carriers for SMS.

WhatsApp has real customers. Not just consumers. The 99¢/year Whatsapp charges is 99¢ more than users are paying now for Facebook itself. This means Facebook has, for the first time, consumers who are also customers. Having a paid relationship with customers who are not mere consumers (or, in the lingo of the drug and computer industries, “users”) is a huge thing. It closes a split that not only troubles Facebook, but Google and every other business with an advertising-only model. And think about this possibility (or from where I sit, certainty): what made Whatsapp especially valuable and distinctive from the start was not having advertising. It says advertising on mobile has net-negative value — not for advertisers, who are out of the loop, but for human beings using mobile devices. Here in the VRM development world we’ve been been waiting for the advertising bubble to deflate, and now Facebook makes $19 billion bet on it. This should yank the veil off the eyes of everybody who still thinks advertising is going to “pay for the free Web” or whatever. It never really did, and it never will. Real business will happen here, in addition to the stuff that was free before advertising came along. Lots of it will happen directly, between anybody and everybody. And remember, Zuck never liked advertising. (Seen the movie? Zuck’s antipathy toward advertising drove a major sub-plot that still hasn’t played out.) Oh, and putting Jan Koum, WhatsApp’s CEO, on Facebook’s board gives Facebook a good heart to go along with its smart heads.

The holy grail of mobile payments is within reach. WhatsApp already integrates audio, video and photography. Next up: voice service to beat Skype’s and conference calling to beat Skype’s and everybody else’s. Why not? Skype has been idle since Microsoft bought it and the rest of them suck in their own ways. Payments will be harder, and there are political and regulatory hurdles (plus huge competitors, some of which might be potential partners). But soon the electric slab your pocket might finally integrate with your wallet.

Next up: intentcasting. How long before you point your phone at a pair of shoes, or a QR or barcode for any product, and either ask the seller (by text) if they have it in the size and color you want, or advertise your desire to the world, either socially (telling friends) or privately (telling nobody but potential sellers who agree to your terms)? Play a little API and programming jazz and you’re in business. (“You” being anybody, or, of course, Facebook.)

The tech matters. Whatsapp uses a customized version of XMPP (originally called Jabber), the open protocol created by Jeremie Miller and the team now working on Telehash. I bring this up not for WhatsFace, but for the rest of us. There are plenty of free and open building materials laying around. Go build something.

Here are some places to start, where #VRM has already blazed some paths to the frontier.

Truly personal clouds. I’m talking about your own secure and fully personal virtual spaces in the connected world, not just places to store stuff. These personal clouds will have their own open source operating systems (e.g. CloudOS), programming languages (e.g. KRL), privacy canon (e.g. the Respect Trust Framework) and protocols (e.g. XDI).

Integration with the Internet of Things. I wrote about this a year ago here. Phil Windley explains here how every thing (which he calls a pico, for persistent compute object) can have its own cloud. And how those clouds can live in your cloud. And how they can interact with other things, and service, and APIs, programatically.

Customer service run by customers. Right now CRM — customer relationship management — is broken in this one simple and single way: You can’t relate in one way to every company, but must go inside each one’s closed silo to do anything, in different ways in which the company calls all the shots and you call exactly none. Wouldn’t it be much cooler to be able to change your address or phone number one time for every company you deal with, and not separately? And wouldn’t it be much better if you and the companies you deal with had shared spaces where you both kept usage records, product updates, contact information and everything else? This is do-able. I wrote about it here in an HBR post.

Better economic signaling. Intentcasting is one example. Another is people running their own customer service platforms, for everything they care about, in their own clouds. (As in the last two items above.) In both cases customers will be able to signal intentions (about shopping, buying, requiring service, whatever) far more efficiently and consistently. And the failings of advertising, which Don Marti has done a great job unpacking.

Market based marketing. Once free customers prove more valuable than captive ones, marketing will find that actually talking to people will have a lot more leverage than trying to herd them like cattle, or force them to operate inside feudal empires.

The pendulum is swinging away from centralization, back toward the distributed nature of the Net as it was designed in the first place. Here is how Paul Baran described the Net’s future architecture in 1962:

Ever since the Net went viral in 1995, companies and governments have been trying to stuff the distributed genie back inside the centralized (or by compromise, decentralized) bottles. Now, in post-Snowden time, we’re learning the errors of those ways, and are  ready for truly distributed solutions. It should help that some of us around ProjectVRM are already downstream in that direction.