Why WhatsApp scrapped its $1 annual subscription fee

Facebook-owned messaging service WhatsApp announced earlier today that it’s ditching its $1 annual subscription fee, and will instead monetize by developing a service that allows companies to communicate with their customers through the app.

But in the wake of the news, a number of people across the social sphere have expressed surprise that there was ever a subscription in place, while others have simply said that they’ve never had to pay an annual fee. So why was that?

@psawers @m4tt I also have never had to pay it, but I also don’t use it that often.

— Matthew Keys (@MatthewKeysLive) January 18, 2016

Well, it turns out that whether you’ve been required to pay WhatsApp’s annual fee or not depends very much on when you joined the service, and even on what country you live in.

Up until July 2013, WhatsApp charged iPhone users a one-time fee of $1 to download the app. But then the company brought iOS in line with Android and made the app free to download and use for the first year, charging a $1 annual fee thereafter. But as a goodwill gesture to those already using WhatsApp, it gave existing users lifetime access to the service. Even if someone changed their device, as long as they kept the same mobile number, they would never have to pay another cent.

The vast majority of WhatsApp’s 900 million-strong user base have signed up in the past couple of years, so today’s news that the $1 annual fee is being scrapped will likely benefit most people. But if you were an early adopter, then you’ve already been enjoying free access to WhatsApp.

Elsewhere in today’s announcement, WhatsApp cofounder Jan Koum revealed another reason the company’s ditching the $1 fee across the board. Some people, particularly those in developing markets, don’t have credit cards and therefore are physically unable to pay the $1 fee. This is why WhatsApp was already waiving the $1 annual fee in many countries, including India, and this also helps explain why in the App Store description it says somewhat enigmatically that it “may” charge after the first year. Basically, some people paid and some didn’t.

Getting rid of the $1 fee not only allows WhatsApp to explore alternative, and potentially more lucrative, revenue streams — such as corporate partnerships — but it also brings consistency to its business model. Either everybody should pay the yearly $1 fee, or nobody should pay it. WhatsApp has opted for the latter.