The Israeli Answer to WhatsApp Is Big in Eastern Europe - and Iraq

Quietly avoiding all the buzz of young applications like WhatsApp, Snapchat or Facebook’s Messenger, the most popular Israeli app in the world is flourishing under the radar.

Claiming 754 million subscribers and about 250 million active users per month, the relatively ancient Viber has taken its place as one of the leading global players in instant messaging.

Viber’s story is exceptional for two main reasons. First, Viber is one of the few examples of a successful consumer app from Israel. Others include Waze, with 50 million monthly users, according to Google, and Gett, which caters mainly to Israel and Russia. Viber had 249 million users in April, according to Statista, making it the most popular Israeli app worldwide.

The story of Viber’s buyer is also unusual in Israeli high tech. Facebook surprised the technology and finance worlds two years ago, when it announced it was buying WhatsApp – with 400 million users and marginal download revenue – for $22 billion. Around the same time, Japan’s Rakuten acquired Viber for $900 million. At the time, Viber had about 300 million subscribers, a third of them in Asia. Privately-funded Viber also had revenue from phone calls to land lines, but not nearly enough to justify the price.

“Viber and Waze are two wonderful examples of companies that were bought and remained autonomous regarding development,” says Viber COO Michael Shmilov. “It’s a vote of confidence in Israel’s ability to continue generating such products.” Shmilav co-founded Viber, which began as a product within Talmon Marco’s iMesh.

Viber employs 190 people in its Bnei Brak office, which answers to Japan. It was the first deal of this scope by a Japanese company in Israel. Last year, Sony joined the Japanese players in Israel when it acquired Hod Hasharon-based Altair Semiconductor.

Thanks to the Japanese

“The amount Rakuten paid wasn’t too large. considering that now it is one of the biggest players in its field,” reflects Shmilov. “Rakuten made an interesting move. It’s a company that started an online trading platform, which moved into financial services, tourism and insurance. What connects all the parts is membership. People collect points worth money when ordering products to buy more products,” he says. “They saw in Viber an opportunity to add a large community of users.”

Shmilov says Viber has changed since its acquisition. “We learned much about Japan. It’s a crazy market,” he says. “The more Israeli industry learns from it, the more it will open doors to interesting opportunities. We learned to think more globally in the product field. We learned that being global doesn’t mean translating a word here and there but to look around and think how different cultures will receive a product.”

“Our global strategy is adapted to the market,” says Elad Kojocaru, Viber’s marketing VP. “There is no such thing as looking at the world as one market. The differences are expressed in the competitive structure, the way products are used and how users are viewed.”

Unfazed by transition

Viber has benefited from the growth of instant messaging, which has become bigger than social networks over the past two years, growing to 754 million users. By comparison, WhatsApp also doubled in the same period, crossing the billion-user threshold.

The company refuses to divulge data on revenue and the rate of users paying for services. “Rakuten sees results. We have company goals, generating profits is not one of them,” says Shmilov. “Our focus is growing the product.”

Management may be Japanese, but Israel still has a significant role in leading Viber. Its Israel center deals not only with technological development and quality assurance but also product management, global marketing and support. The company plans to expand its Israeli workforce by 30% this year.

“The Israeli market has ripened in recent years and started producing global B2C products. You see it in companies like Viber, Waze and Playtika,” says Kojocaru. “There is a focus in Israel on knowledge of performance marketing, which reaches out to a global community.”

The company’s marketing activity, which is mostly digital, is led from Israel because of its proximity to product management and user data, according to Kojocaru.

Viber and WhatsApp offered slightly different products at the time both were acquired. Viber was focused on VoIP calles, while WhatsApp on text mesages. But over time the distance between them narrowed. Both of them are leading players worldwide in IM. A billion people use their services daily, sending private, group and voice messages.

Representatives at the company, which was born as a voice call app, are not bothered by the transition from voice to text. “Viber is a communications product, not a call app,” says Kojocaru. “We will be where the market needs us, so it doesn’t bother us if the market is going for more or fewer calls.”

An additional feature of Viber is stickers. There are packages of illustrations, which users can download and add to messages. The company’s business model is based on, among other things, some of the packages being downloadable for pay and partnering with commercial entities, like banks in Russia and Ukraine, which pay for distributing a brand package.

“The stickers allow a broader range of feelings and self-expression that texts make hard to express,” explains Kojocaru about the feature’s popularity.

The next challenge

Viber’s main competitor was not always WhatsApp or Facebook. At first, six years ago, the company’s main product was internet voice calls, in competition with Skype, which Microsoft bought in 2011 for $8.5 billion. “Viber spread in Israel because telephone call charges then weren’t unlimited, and people paid a lot for them,” recalls Shmilov. “You could use Viber for free calls. Registration was based on users’ telephone numbers.”

Viber’s iPhone app began as an experiment by the parent company, iMesh, and was crowned a success, according to Shmilov. Not much later, the Android app was launched, adding the IM option, which is now the main feature.

IM apps are a classic case of web effect. The more users an app has, the more its value to other users rises because they can call more people. This pattern makes the app more successful.

“Imagine what you see happening with WhatsApp in Israel, happening in other countries with an Israeli product,” says Shmilov about Viber aboad. Since the sale, the mix of Viber users has changed, with its main users in Eastern Europe and Russia, including Balkan countries like Greece and Bulgaria.

Viber forecasts growth in Africa, according to Shmilov. “Even in Israel, which is a ‘WhatsApp country,’ we have hundreds of thousands of users,” he says. “Dominance is important in the field of messages because you don’t use it alone. The idea is the amount of friends you have on an app, so the more dominant you are, the more significant a player you are.”

Each company in Viber’s field prefers different statistics. Viber prefers the number of countries in which it is the most popular app, which is 10, according to a recent report by Israel’s Similar Web, which looked at user data of Android devices in 187 countries. This data doesn’t include iPhones, which impacts mainly developed nations.

Viber is particularly popular in Eastern Europe, according to the data, being the main app in Belarus, Moldova and Ukraine, where 65% of all Android users have downloaded the app, with the average user spending 16 minutes a day on the app in April. Other exotic markets where Viber is popular include Iraq, Libya and Sri Lanka.

WhatsApp leads with a 55% market share, according to SimilarWeb, dominating Brazil, Mexico, India and Russia. Facebook’s Messenger leads in 49 countries, among them Australia, Canada and the United States.

Viber cannot characterize its typical user. According to Shmilov, in places where market penetration is low, users are mainly business people or tourists. “In Israel, for example, a typical user is in touch with users in a country where we are big, or is a tourist who needs more flexibility,” he says. “In countries where we are big, there is no average user profile.”

One of the main current technology trends is messaging apps turning into service platforms, through which third parties such as banks reach clients. This trend is expected to strengthen in the coming years, impacting Viber, too. “Some 300 million PCs were bought over 30 years, while 1.5 billion smartphones were sold within a decade,” says Shmilov. “It’s a new reality.”

“Usage patterns are moving from the web to the app. Companies are pushing you to download their app. People understand that a mobile phone has all the existing abilities and sensors,” he says. “In parallel, the trend is for users to download up to 24 apps and use five apps daily. It says that the same five apps turn into the entryway to the web. They have the potential to turn into an access point for existing services, and that is the thing creating the trend that we now see.”

Still, Shmilov believes message apps won’t turn into the only platform for user interaction with businesses.

Another aspect is the advent of the internet bot, which are software applications that run automated tasks. Shmilov says that Viber is working on allowing communication between regular users and companies and organizations. “The focus is on finding the appropriate users and the appropriate technology,” he says, describing Viber’s preparation for the age of bots. “In some countries, for example Russia and Ukraine, we are already enabling communication between the bank and the user.”