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Tuesday, September 30, 2014
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Published: Sunday, 2/23/2014 - Updated: 7 months ago

Mega union of Facebook, WhatsApp proves that opposites do attract

NEW YORK TIMES
Jan Koum, 38, co- founder of WhatsApp, says the company despises advertising and values the privacy of its 450 million users so much that it does not even collect their names. Jan Koum, 38, co- founder of WhatsApp, says the company despises advertising and values the privacy of its 450 million users so much that it does not even collect their names.
ASSOCIATED PRESS Enlarge

SAN FRANCISCO — Jan Koum fled the former Soviet Union with his mother when he was 16, leaving his father behind. He worked in the engineering trenches for a decade at Yahoo Inc. before starting out on his own. When he was a young man growing up in Mountain View, Calif., his family relied on food stamps to get by.

Now Mr. Koum, the co-founder of WhatsApp, is a billionaire several times over and business partner with Mark Zuckerberg, the Facebook Inc. chief who, in many ways, is his polar opposite. Mr. Zuckerberg, 29, who dropped out of Harvard en route to overnight riches, bought Mr. Koum’s mobile-messaging company last week for at least $16 billion, betting big on an entrepreneur who does not follow the typical young-and-brash Silicon Valley playbook.

Mr. Koum, 38, and his co-founder, Brian Acton, prefer to operate lean and below the radar, with 55 employees. They say they despise advertising and value the privacy of their 450 million users so much that they do not even collect their names. Mr. Zuckerberg, by contrast, has built his empire by collecting reams of personal data on his 1.2 billion customers and using that to sell ads aimed at them.

Even as Facebook gets more corporate and more complicated to use, Mr. Koum and Mr. Acton, 42, are obsessively focused on just one thing: offering a simple, private, nearly free way for people to share text, photo, and video messages with those they care about.

“You don’t want to get in the way of two people communicating,” Mr. Koum said in an interview at WhatsApp’s headquarters in Mountain View last spring. “Imagine if I said, ‘Let’s stop for a second, let me pull down this slide. Would you like to see a preview of this game?’”

After repeatedly insisting that he would not sell his company to an ad-driven behemoth such as Facebook, Google, or Yahoo, Mr. Koum has reversed course.

Mr. Koum offered little explanation for his change of heart during a conference call with Mr. Zuckerberg and Wall Street analysts to discuss the deal.

“Facebook is a social network and offers many different and important functionalities than WhatsApp offers as a communication service, and we’re excited to benefit from the unique expertise, knowledge, and infrastructure that Mark and the team have built out over the last decade,” he said.

Mr. Koum said WhatsApp will operate independently and will not offer advertising. Mr. Zuckerberg said he wanted WhatsApp to focus on increasing the number of people who use it to 1 billion and would not pressure the company to add to its modest revenue from its dollar-a-year subscription fee any time soon.

Through a spokesman, Mr. Koum and Mr. Acton declined interview requests.

Mr. Koum and Mr. Zuckerberg do share a common ambition — to connect everyone in the world using their services.

“We want WhatsApp to be on every single smart phone,” Mr. Koum said last month during an on-stage interview at the DLD conference in Munich.

He expects 5 billion people to be using smart phones within the next decade, and he wants to serve every one.

The inspiration for WhatsApp came after both founders left their jobs at Yahoo in 2007 and took some time off. Mr. Acton moved to New York, and at one point proclaimed on Twitter that he had applied for a job at Facebook and had been rejected. Mr. Koum traveled to Argentina and other countries and realized that it was difficult to stay in touch with friends.

International area codes made it difficult for people to call him. Email was simple, but it was not as streamlined as a text message. Text messages were expensive, costing at least 25 cents for each one sent from Europe to the United States. And online chat services from Google and AOL required knowing people’s screen names.

Two years later, Mr. Koum returned to the United States, bought an iPhone, and reunited with Mr. Acton to build WhatsApp. The service would take advantage of a phone’s address book to make it as streamlined as text messaging, and it would be nearly free like other Internet messaging services. Privacy was vital.

“For us, everything is built around us knowing as little as possible about the user and what they do on our network,” Mr. Koum said at the Munich conference.

“I grew up in a country where I remember my parents not being able to have a conversation on the phone,” he explained. “The walls had ears, and you couldn’t speak freely.”

Just as important to the founders, who share a hippie ethos and distaste for cutthroat capitalism, was the business model.

Instead of financing the service with ads and games like other services to draw eyes to advertisements, Mr. Koum and Mr. Acton made WhatsApp a free software download that would charge a nominal fee after the first year. They would make the app usable on a broad range of smart phones, from dated BlackBerrys, which they both still use for texting, to sleek new Android phones and iPhones, so that people rich and poor all over the globe could take advantage of the service.

Those early decisions allowed the company to remain small, independent and lean even as the app went viral in several parts of the world, especially Europe. Users enjoyed the simplicity and low cost of communicating with friends and family around the globe. And they also appreciated the privacy of a service that did not analyze or store their messages — a rarity in the Internet age.

Venture capital firm Sequoia Ventures invested $60 million in WhatsApp and will make as much as $3 billion in the sale.

Unlike Snapchat, another messaging service that Facebook flirted with buying last year, WhatsApp’s messages are intended to offer a permanent record of life’s conversations.

Last spring, the founders said they were happy with WhatsApp, which then had a mere 40 employees and 300 million monthly users. They were also firm about never selling their company.

“Facebook and Google, Cisco and Apple, and all those companies, they never sold,” Mr. Koum said. “They always took on the path of independent companies and marched them forward, and that’s what we want to do. We want to be as good or as great as those companies.”



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