WhatsApp delays launch of voice calling service to Q1 of 2015

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HALF MOON BAY, Calif.--WhatsApp CEO Jan Koum said the over-the-top messaging app intends to launch voice calling services in the first quarter of 2015. The company, which Facebook (NASDAQ: FB) recently finished acquiring, had initially planned to launch calling in the second quarter of 2014.

Koum

Koum, speaking here at Re/code's Code/Mobile conference, said launching calling services is difficult to do well. He noted that WhatsApp is working through several technical issues related to the launch, including the fact that the app does not have access to certain phone microphones, which makes noise cancellation more difficult. He also said that the firm is trying to work through how the service would operate in situations where data coverage is poor, noting that many WhatsApp users in emerging markets are still using 2G EDGE coverage.

Facebook completed its acquisition of WhatsApp earlier this month. The service currently has more than 600 million monthly active users. Koum said the company has historically been focused on growth and still aspires to run on every smartphone in the world. Most new users are coming from markets like Brazil and India, he said, but he acknowledged that there are still markets where WhatsApp isn't dominant.

However, Koum said WhatsApp still wants to cross 1 billion active users within the next several years. With Facebook's financial support and infrastructure, he said, the company is now able to focus squarely on growth.

Earlier this month Facebook CEO Mark Zuckerberg confirmed that the social networking company does not have any near-term plans to make money off of WhatsApp. WhatsApp is free to download and use for the first year. After that, users can purchase access to the service for $1 per year.

Koum reiterated that the company does not intend to add advertising to the app. "We don't think advertising is the way to monetize a product like WhatsApp," he said, adding that it would hurt the user experience, which is based around real-time communication.

Facebook's acquisition of WhatsApp totaled $21.8 billion when the deal closed. In Securities and Exchange Commission filings, Facebook disclosed that it valued WhatsApp's users at around $2 billion, the company's trade name at $448 million and its technology at $288 million. Facebook said $15.3 billion of the valuation was related to WhatsApp's "goodwill" value, which, as Re/code notes, is by definition intangible.

Facebook also revealed that in 2013 WhatsApp posted a loss from operations of $138.5 million (of which $98.8 million was related to stock-based compensation), wider than the loss of $55.6 million it had in 2012. WhatsApp recorded $10.2 million of revenue in 2013, up from $3.8 million in 2012.

Koum said WhatsApp will not compete that much with Facebook's own Messenger app, which lets users make free voice calls over Wi-Fi both domestically and internationally. He noted that Facebook Messenger is based on Facebook friends and that it runs on desktops, whereas WhatsApp is a purely mobile app, so that when users use WhatsApp they know the message will go directly to a contact's phone.

Koum was asked if WhatsApp will partner with connected appliances, as messaging app Line has done with LG Electronics for its HomeChat service. Koum said WhatsApp gets requests to make the app more memory and battery efficient. "I don't think people are writing to us every day wanting to get messages from their refrigerator," he said.

As for Facebook itself, the social networking giant reported third-quarter net profit of $806 million, nearly double the $425 million the company had in the year-ago period. Facebook's revenues soared to $3.20 billion in the third quarter, up from $2.06 billion in the year-ago quarter. Advertising revenue was $2.96 billion, up 64 percent from the same quarter last year. Additionally, mobile advertising revenue continued to grow as a percentage of Facebook's ad revenue, and represented around 66 percent of advertising revenue for the third quarter, up from 62 percent in the second quarter and 49 percent in the year-ago period.

However, Facebook spooked investors by noting that it expects costs, including for hiring, to rise 55 percent and as much as 75 percent over the next year. "We plan on 2015 being a significant investment year," Facebook CFO Dave Wehner said on the company's earnings conference call. According to a Seeking Alpha transcript of his remarks, he said Facebook will continue to invest in advertising technology as well as initiatives like Internet.org and recent acquisitions like WhatsApp and Oculus, the virtual reality platform.

For more:
- see these two separate SEC filings
- see this Re/code article
- see this NYT article
- see this Facebook release
- see this CNET article
- see this Re/code article
- see this TechCrunch article

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