Every social media app that you use every day bombards you with advertisements.
Advertisements alone generate significant revenue for services like Facebook, Instagram,
Twitter, Snapchat, and others in exchange for keeping their apps free to use.
However, there is one app on the market, which is a big part of our lives, and that app makes
money without ads or subscription fee.
That is WhatsApp.
WhatsApp is a free instant messaging service that allows users to send text messages, voice
calls, video calls, images, and other media using standard cellular phone numbers.
Many students use it for note-taking, and many businesses use it for meetings and team
discussions.
It can be downloaded on iPhones, Android phones, and other smartphones, and it uses data instead
of your mobile phone plan, so if you have an internet connection, you can send and receive
messages, photos, videos, and contacts through WhatsApp without paying for it.
WhatsApp was the first app of its kind on the market, and one of the main reasons people
like it is because of its simple, beautiful interface, as well as the fact that it is
completely ad-free makes it more successful.
But there is always a prominent question in every user’s mind that how WhatsApp makes
money when its services are free?
Join us today in our discussion on the economics of this instant messaging app . We will also
be talking about how its history and business model.
So, let’s begin…
WhatsApp was launched in January 2009, after the founders purchased an iPhone & realized
that the app industry was an untapped market that has the potential to grow.
This was back in July 2008, when the Apple App Store had only been open for about six
months.
Before founding WhatsApp in 2009, the two WhatsApp founders, Jan Kaoum and Brian Acton
worked together at Yahoo for 9 years, from 1998 to 2007.
In fact, between leaving Yahoo and starting WhatsApp, they both applied for jobs at Facebook
but were turned down.
The reason both founders left Yahoo was their disagreement to the ad-selling policies.
So, they wanted to make an app that was free from advertisements, which than led to the
launch of WhatsApp.
However, WhatsApp wasn't even a messaging app when the first version was released.
Users could only update their statuses, which were visible to others in their network or
contact lists, WhatsApp's user base grew after Apple launched
Push notifications in June 2009, which allowed users to be notified when someone in their
network updated their status.
Users liked this functionality so much that they started using the app to ping one another.
Later, WhatsApp version 2.0 introduced with the messaging function and the user base increased
to 250,000 users, and the new era of instant messaging began.
As the app grew in popularity, the founders began to attract the attention of potential
investors.
However, they were a little hesitant as they wanted to build an ad-free product and they
thought that accepting a venture capital might force them to compromise on their values.
The founders were quite outspoken in their opposition to the inclusion of advertisements.
They always stated that WhatsApp was more concerned with user interface and engagement
than with ads and making money.
Despite having not been keen on taking venture money, the founders accepted $8 million from
Sequoia Capital in April 2011, but only after they were assured that the app would remain
ad-free.
By early 2011, WhatsApp had become a part of the top 20 App list of the Apple App Store.
By February 2013, WhatsApp had surpassed 200 million active users, and Sequoia had invested
another $50 million at a valuation of $1.5 billion.
In 2014, Facebook (now META) purchased WhatsApp for $19 billion, with the agreement that Facebook
would allow WhatsApp to operate independently and pursue its vision.
Acton and Koum became billionaires overnight as a result of the deal.
From being turned down for a job by Facebook to having a multibillion-dollar deal with
them.
WhatsApp operated independently for two years following Facebook's acquisition, with no
plans to display advertisements on the platform.
However, Facebook wanted to put ads in WhatsApp, and there was a lot of pressure to monetize
the app.
According to the media reports, the two co-founders then decided to leave after a disagreement
with the company over its use of user data, in addition to the Facebook's desire to allow
advertisements on the app.
In September 2017, WhatsApp launched WhatsApp business to make it a business-friendly app.
Moreover, the web version of WhatsApp is also available and you can now access WhatsApp
from your laptop and desktops as well.
WhatsApp is now solely owned by META and has around 2 billion monthly active users in around
180 countries.
It is now Meta Platforms, Inc.'s second-largest property after Facebook and It has surpassed
Instagram and Facebook Messenger, the third and fourth most popular properties, respectively.
However, it is still ad-free.
WhatsApp's exact revenue is unknown because META does not provide a revenue breakdown
for all of its products.
According to a Forbes estimate from 2017, when WhatsApp had around 1.3 billion users,
the app could earn anywhere between $5 and $15 billion, with an average revenue per user
(ARPU) ranging from $4 to $12.
The scope has recently expanded, with more than 2 billion users as of now.
In fact, by 2023, the number of WhatsApp users in the United States alone, is expected to
reach 85.8 million.
So, how does the app make money?
Or what is WhatsApp’s business model?
Overtime WhatsApp has tried and tested several ways to make money.
In its early days, WhatsApp used the freemium business model, in which the app was free
for a year to entice users and then charged a small annual membership fee of $0.99 for
continued use.
Many users, on the other hand, never paid for WhatsApp because it was automatically
renewed as a free app when their free trial period ended.
Later, it was declared completely free without any subscription charges.
After the acquisition, Facebook/META introduced a strategic revenue model for WhatsApp.
WhatsApp thrived under Facebook's ownership, growing from 450 million monthly active users
at the time of acquisition in 2014 to over 2 billion monthly active users today.
It currently makes money primarily through two channels: WhatsApp for Business and WhatsApp
Pay.
Indirect revenue is also generated by 'Click to WhatsApp ads,' which redirect users from
Facebook to WhatsApp.
Until now, WhatsApp has avoided in-app advertising.
WhatsApp Business The WhatsApp Business app is a separate app
designed specifically for businesses.
It includes functions such as customer chat, away messages, and automated messages.
The app is free for the first three months, after which it costs $0.50 per month.
The app is compatible with both Android and iOS devices.
WhatsApp Business differs from the standard WhatsApp app in several ways.
For starters, businesses can create their own profile within the app, complete with
their company name, logo, and contact information.
Second, companies can communicate with their customers via automated messages.
The company expanded its business functionality by launching WhatsApp Business API, its first
revenue-generating product.
Only a month after the WhatsApp Business API was launched, major tech companies such as
Netflix, Uber, Wish, and 100 others began testing the service.
WhatsApp generates revenue by charging registered businesses for delayed responses.
Businesses can respond to user messages for free for up to 24 hours, but there is a fee
per message for delayed responses, which varies by country.
The late response charge on WhatsApp not only incentivizes businesses to prioritize providing
support on WhatsApp, but it also ensures that customers prefer WhatsApp when communicating
with businesses because they can expect quick responses.
WhatsApp Payment WhatsApp Pay is a payment method that works
similarly to PayPal.
Users can send money to friends, family, and businesses for free.
The recipient of the funds is charged a 3.99 percent transaction fee.
This app, like other money-transfer apps, connects to a bank account from which cash
can be collected or deposited.
With a large user base, this feature is expected to set new benchmarks in the Unified Payments
Interface (UPI) domain.
This will further benefit WhatsApp business in the company’s biggest market.
However, this service is currently only available on a limited number of devices in India and
Brazil.
Indirect Revenue from ‘Click to WhatsApp Ads’
WhatsApp also makes money from Click to WhatsApp ads, which are not ads shown on Facebook,
but rather redirect users from Facebook to WhatsApp.
Because these ads are not displayed in the WhatsApp app, attributing their revenue entirely
to WhatsApp would be incorrect; however, it is one of the ways in which Facebook uses
WhatsApp to increase revenue.
Moreover, WhatsApp intends to monetize the app further by introducing ads in the status
section and expanding WhatsApp Payment into new markets.
So…
WhatsApp has become one of the most popular messaging services in the world with only
room to grow.
The app has a growing revenue stream with endless possibilities, allowing it to bring
in more revenue over time.
In the coming years, the app is likely to contribute more to its parent company's basic
income.
However, Meta Inc. has yet to make a significant profit from WhatsApp, despite other instant
messaging apps such as WeChat app storming ahead.
And its sky-high earning potential is yet to be realized.
According to Forbes, WhatsApp could make anywhere between $5 billion and $15 billion in the
coming years if Meta inc.
implements an effective monetization strategy.
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