A Boost for WhatsApp 

C: In my understanding, Whatsapp as a messaging service is used both by individuals as well as businesses. Do you want me to consider both for the guesstimate?

I: Good thinking. You can start with only individual users.

C: Alright, so the broad approach I would take is to start with the population of India, then categorize it into various income segments, then consider the smartphone adoption rate for the various segments, and then multiply it by the internet penetration rate. This would give us the number of smartphones with internet access. Then we can multiply it by WhatsApp’s penetration rate. Does that sound fair?

I: Sure, go ahead.

C: I’ve considered 25%, 60%, and 80% of people use a smartphone from the low, middle, and high-income segments respectively. This is based on the assumption that smartphones are more affordable for people belonging to middle and high-income segments. Also, the figure is not close to 100% because toddlers and very old people are excluded.

Although the internet penetration rate in India is close to 50%, I am assuming that most people will buy a smartphone only if they have access to the internet and therefore assume that 90% of smartphone users have access to internet. 

I: Sounds great. Do proceed with the calculations to arrive at a final estimate.

C: Further, WhatsApp enjoys a very high adoption rate among smartphone users because of the Network Effect. It has become a preferred mode of communication for personal as well as professional purposes. Therefore, I would assume that 90% of smartphone users with access to Internet use WhatsApp.

Hence, total number of WhatsApp users = (140+250+110)Mn * 0.9*0.9 = 500 Mn * (~0.8) = 400Mn.

Interviewer: Fair enough. Your estimated number is a reasonable ballpark figure. Can you now tell me what kind of companies would be using WhatsApp for Business?

C: Whatsapp would be a preferred mode of communication for individual customers, hence its best use case is for B2C businesses which have to cater to a large customer base. It can be used for personalized marketing, sales enquiries, and after-sales servicing by using chatbots and AI technologies. Food delivery, e-commerce, banking, insurance, and retail are a few industries which can greatly benefit from Whatsapp for Business.

I: Yes, that’s right. Now you can proceed with the first part of the case statement. What would you suggest?

C: Right now, Whatsapp only charges business accounts and does not generate any revenue from individual accounts. As discussed before, the key competitive advantage Whatsapp enjoys over other messaging apps is the network effect. Everyone uses Whatsapp because everyone they know is on Whatsapp.

Now, a sudden introduction of a paid subscription model would immediately result in a huge drop in the user base because switching costs for customers are very low. Rather, an ad-based revenue model like Youtube can be introduced. Users who don’t want to see ads can pay a subscription fee.

I: But imagine that you are in the middle of an important conversation and suddenly an ad pops up. That would be very frustrating right?

C: That’s right. Instead of ads popping up in the middle of a conversation, they can be shown in the status section as people usually watch Statuses in leisure.

I: Interesting. Do you have any other recommendations?

Candidate: Building upon the previous recommendation, more ads can be shown if there are more statuses to watch. Right now, the number of statuses that a person can see is restricted to the people who are in their contact list. Stories and short reels are extremely popular and addicting and introducing that feature in Whatsapp statuses can get people hooked. Enabling people to follow content creators and influencers on Whatsapp would increase the ad-based revenue

Interview: Those are some very interesting recommendations. Thank you, that would be all.