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WhatsApp VoIP: Will it Succeed in the Developing World?

VoIP technology is actually now more than 20 years old and the initial boom in consumer wireline VoIP came more than 10 years ago. Wireless mobile VoIP has also been around for quite a number of years. The first consumer application was introduced in 2006. A long time ago in telecoms!

According to the telecoms press, WhatsApp is preparing to offer voice calling for the first time. This rumour has caused great excitement amongst commentators. If you were to read some of the more enthusiastic articles you'd think that mobile VoIP via an app was just about to be invented! But it's worth remembering that in many regions, especially in the developing world, in-app calling has been around for a while. There are already some extremely well established VoIP apps being used in India, Africa and the Middle East and WhatsApp will struggle to win customers from these big players.

Much of the media excitement stems from the fact that many consumers still think of VoIP as 'new' technology; something that 'techy' people use instead of their landline. But VoIP technology is actually now more than 20 years old and the initial boom in consumer wireline VoIP came more than 10 years ago, so it's fairly mainstream these days. What surprises me, however, is the patchy acknowledgement, even by industry commentators, that wireless mobile VoIP has also been around for quite a number of years. The first consumer application was introduced in 2006. This is a long time ago in telecoms!

In the developing world, especially in India and the Middle East, the big player in mobile calling apps are Nimbuzz and Viber. Nimbuzz for example serves more than a billion VoIP calls per month, including both P2P free calls and paid VoIP calls to mobile and landlines. One of the possible reasons why WhatsApp may want to add VoIP is the pressures of building revenues - VoIP is seen as a natural fit for a messaging app and can be lucrative. However, while it may work quite seamlessly in West, in most emerging marksets a large proportion of paid VoIP calls happen through purchase of VoIP credits offline using cash. It's not just a coincidence that cash-on-delivery is the most prominent payment mechanism in most emerging market e-commerce ventures.

In the short term, in my view, it's going to be very difficult for WhatsApp. Nimbuzz, and the other players in the region, know their market. They understand that their customer base has low-cost handsets with low memory and low battery. These in-territory VoIP apps have the advantage because for years they've been working on improving the voice codecs and media engine, refining them to suit lower cellular data bandwidths and stop battery drain, so that voice quality can be maintained on even low bandwidth networks. They've also made adjustments to ensure that VoIP works even on sub-$100 Android devices. If WhatsApp VoIP is going to break into the developing world then they're going to have to run very fast to catch up.

In reality, the most important point about the WhatsApp rumour is not their launch of VoIP. They are just going where the money will be - VoIP calling, according to Ovum Research, is slated to become 1.3 trillion minutes strong globally by 2018. Instead, it's what their drive for VoIP says about the Western corporate need to grab the exploding market in the developing world. The growth over the next few decades will not come from the West but from the East and sub-Saharan Africa - and emerging markets, unsurprisingly, like low-cost or free calling.

Take oil-rich Nigeria for example. Nigeria is booming and in 2014, Nigeria's economy overtook South Africa to become the largest in Africa. This wealth and economic growth means that there is a fast-growing middle class with large disposable incomes. It also means that Nigeria is the fastest growing market globally for smartphones. And it doesn't stop with Nigeria. According to Kevin Walsh, forecasting director at GfK: "Our forecasts show seven new entries in the top 10 smartphone markets for 2015, in terms of growth by value - and these are all emerging markets, which have overtaken developed markets where smartphone saturation is nearing completion. The reason for emerging market dominance of smartphone growth in the next year is that pricing is reaching the sweet spot of $30 to $50. This brings a major population segment (earning $2,000 to $4,000) into the market."

One of the other major boom regions is South Asia and explosive growth of mobile VoIP in this region is predicted, especially in India which, according to GfK's Target Setter, leads the countries predicted to see technology sales grow the most in 2015.

All this scrambling by Western corporations to establish a presence in the developing world is understandable. But in my view, the problem lies with introducing technology created in the developed West, apps and systems designed for Western ways of life. There is an unspoken expectation that this technology will not only work perfectly in the developing world but also be automatically welcomed with open arms. This expectation ignores the fact that while the West has been patting itself on the back, India, Africa and the Middle East have been developing their own technology which is fit for purpose and far more advanced that many Western corporations would like to believe. Whatever the outcome of WhatsApp's entrance into the VoIP market, in the medium-term at least, technology developed in emerging markets will continue to have the upper hand.

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