By Natalie Wetzel and Thomas Porwol | Jun 27, 2023 at 4:09 p.m
Facebook paid 19 billion dollars for WhatsApp in 2014 – and made its founder Jan Koum extremely rich. But the path from the initial idea to a profitable company was not always easy.
WhatsApp is the most used messenger service worldwide. There are now other comparable apps such as Telegram, Signal or the Chinese WeChat, but in terms of user numbers they are far from reaching the pioneer among chat applications. WhatsApp inventor Jan Koum wrote a small piece of communication history together with his co-founder Brian Action in 2009. And it all started with a trip around the world and an old Nokia.
Jan Koum’s tough way to the top
The basic idea behind WhatsApp is actually so simple that you might wonder why it didn’t come up sooner: a smartphone app as an alternative to SMS that sends messages via the mobile Internet instead of cell phones. But thanks to this supposedly simple idea, WhatsApp founders Jan Koum and Brian Acton have made it up since 2014: They sold the messenger to Meta, which was still called Facebook at the time, for a staggering $19 billion. At a reading at Stanford University in 2017, Jan Koum revealed how he came up with this billion-dollar idea. As part of the “Startup School: How to Build a Great Product” lecture series, various founders spoke to the students about their ideas, their failures and their successes – including Jan Koum, because WhatsApp had to contend with considerable initial difficulties. The posts are still available on YouTube, by the way.
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Enabling Social Media Jan Koum speaks at Stanford about his $19 billion idea.
Today, business magazine Forbes estimates Jan Koum’s fortune at a comfortable $14.2 billion (as of June 2023). But unlike many other successful founders, Koum started from a much less privileged situation. Born near Kiev in 1976, he grew up in what was then the Soviet Union. When this collapsed in 1992, his mother immigrated to the United States with the then 16-year-old. At times the family was dependent on welfare and food stamps. Young Koum took a part-time job as a cleaner in a supermarket. With the founding and later sale of WhatsApp, he realized his very personal American dream.
But first he began studying at San José University in California, but eventually dropped it to work full-time at Yahoo as the person responsible for the technical infrastructure. Nine years later he was tired of that job too and quit in 2007 along with Brian Action, who had recruited him at Yahoo at the time. The world was calling and wanted to be explored.
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Travel the world with the Nokia 6610
“I traveled at the end of 2008. It went to Argentina, Russia, Ukraine, Hungary, Israel,” reports Koum, who didn’t even have a smartphone in his pocket at the time. Instead, he relied on the old and iconic indestructible Nokia 6610. But the cell phone had one major disadvantage: “What I found particularly difficult was staying in touch with my friends – especially in Argentina.” The country-specific area codes would have him on the trip made life difficult, as well as the problem of never knowing whether the person you called had time to talk.
When Koum returned from his world tour, he gave himself an early birthday present, bought an iPhone and got to work with Brian Action. By the way, the official founding date of their company is February 14, 2009 – Koum’s 33rd birthday. The first idea for WhatsApp had little to do with today’s concept: “The first thing we built back then was based on the concept of status messages,” explains Koum. Similar to instant messengers like ICQ, you should be able to write status texts with it and give callers the opportunity to check before they call whether you have time at all. Chatting via the app as we know it today was not even planned at that time.
First WhatsApp attempt fails miserably
The problem: Nobody used the service. “It was a disaster,” Koum grins, “It was depressing. People downloaded the app but didn’t use it.” Help came from an unexpected source. In 2009, Apple made it possible to send push notifications to iPhones. “Now you could also receive notifications when the app was not being actively used.” This had an effect that Koum and Action had not expected:
“We noticed that people use status messages to communicate with each other. For example, they changed their status to ‘I’m going to a bar’ and the status was sent to all WhatsApp users who were in their address book.” And that’s when the WhatsApp founders clicked: They equipped WhatsApp with a chat Function after and the foundation for today’s messenger app with about 2 billion users was laid. From December 2009 it was even possible to send photos, which was a novelty at the time and a welcome alternative to the cumbersome MMS.
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The $19 billion deal
In 2014, Jan Koum’s WhatsApp story came to a personal climax. Facebook CEO Mark Zuckerberg makes a purchase offer to Koum and Brian Action, which the two happily accept. Koum proves to be a man with a flair for symbolism, as he signs the contract at the now-vacant social welfare office where he collected food stamps for himself and his mother as a teenager. At this point WhatsApp has 450 million users and Jan Koum is a billionaire at 38 years old.
Even though WhatsApp now belonged to Facebook, Koum initially remained a member of the supervisory board. His annual salary: $1 and $1 billion in stock options. Having become wealthy, Koum also discovers his nonprofit page and donates Facebook stock, valued at $1.15 billion at the time, to various open source foundations, the Silicon Valley Community Foundation and the Koum Family Foundation.
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Data protection yes, advertising no – that’s the ideal
In 2018, however, Koum stepped down as CEO of WhatsApp and also left the Meta board. The reason for this is said to have been a dispute with Mark Zuckerberg about the planned introduction of advertisements on WhatsApp and the handling of data protection. The topic of advertising is discussed again and again on WhatsApp, since the free app itself does not generate any money. So far, however, no steps have been taken in this direction. WhatsApp co-founder Brian Action has since left Meta and called for the Meta apps to be deleted in the wake of the Cambridge Analytica scandal. Today he sits on the board of the messenger alternative Signal.
Privacy protection was originally one of the cornerstones of WhatsApp under Koum and Action. The app should be used as anonymously as possible without having to disclose personal data. Since WhatsApp became part of Meta, however, a lot has changed. Meta repeatedly stumbles over its own controversial handling of data protection.
When it came to end-to-end encryption, it turned out in 2021 that the chat content was apparently not as untouchable as Meta had promised, as ProPublica magazine found out. Also in 2021, the Irish Data Protection Commission found that Meta had violated EU data protection regulations because the group did not sufficiently inform WhatsApp users about the disclosure of personal data to third parties. Meta should therefore pay a fine of 225 million dollars.
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„I want to do one thing and do it well“
But Jan Koum has nothing more to do with these hassles. “It’s been almost a decade since Brian and I started WhatsApp. It was a wonderful trip with some of the most amazing people. But it’s time for me to do something different.” Koum wrote this on Facebook in 2018 when he left the group. At the end of the same year he shut down his Facebook profile. “I want to do one thing and do it well” – true to his motto, Koum has been enjoying his life as a multi-billionaire ever since. He collects vintage cars and plays Ultimate Frisbee.