in march 2020 whatsapp's active number
of users crossed 2 billion that is 6
times the population of the united
states it is by far the most popular
messaging app in the world with over a
hundred billion messages sent via
whatsapp every single day even china
with its 1.5 billion population can't
compete with it
the only problem is
no one really knows how the world's most
popular messaging app makes money
unlike facebook or instagram
whatsapp doesn't have ads and the app is
free so the question is
why facebook paid 19 billion dollars to
purchase an app that doesn't make money
or does it
let's take an inside look at the
viciously profitable business of
whatsapp and how it makes billions of
dollars behind its users back
[Music]
whatsapp was founded by jan comb and
brian acton both are former computer
engineers at yahoo but that's where the
similarities end
koh moved with his mother to the united
states in 1992 from ukraine back when
the soviet union had just collapsed to
make ends meet his mother took up a
babysitting job while jan worked at a
grocery store clerk but jan was
interested in something else
back in the 1990s an internet revolution
was taking place and jan was all into
computers he eventually became a
self-taught programmer when youtube and
google didn't even exist
he climbed his way to get a job at eui
where he was sent to work at yahoo's
advertising system where he ended up
meeting acton
the two men quickly became close friends
acton got him a job at yahoo as a
computer engineer but in the early 2000s
yahoo wasn't doing great it made a few
huge mistakes such as buying
broadcast.com for over 5 billion dollars
and it was losing ground for other
emerging companies such as google and
amazon
the two friends were assigned to work on
advertising platform that yahoo was
developing
however
both of them
hated ads
so they got frustrated and left the
company and applied to facebook but
didn't get a call back
around the beginning of 2009 cohn
purchased his first ever iphone and
realized the potential of the app store
they knew that an entire industry would
be built upon apple's ecosystem
that's where the next opportunity
is going to be
they brainstormed multiple ideas but
eventually settled on a messaging app
back then the only free messaging out
was blackberry's bpm which was only
available to only blackberry holders
so they decided to create an alternative
option for the rest of the phones and
named it what's up short for what's up
the app took off immediately in the
first few days over
250 000 users downloaded the app
the two friends realized that they have
just stumbled on a gold mine
they convinced their former employees to
invest
250 thousand dollars into the company
and expanded their team drastically but
whatsapp had one problem a big one in
fact
while other social media platforms such
as facebook earned money by selling ads
whatsapp founders left yahoo for hating
ads
they promised themselves to never derail
the app with ads or other distractions
so although whatsapp was growing
astronomically
the app was not making any money
therefore to sustain the team they
charged users one dollar a year which at
the beginning seemed like it would push
away users
but it didn't
what's up with rise to become a top 20
app in the us app store by the beginning
of
2011. by 2013 whatsapp had over 200
million monthly active users and a staff
of only 50 people and was valued at 1.5
billion dollars with that many active
users the company had a revenue of 200
million dollars and with that kind of
growth it was a matter of time before it
crosses a billion users and it was clear
how whatsapp used to make money
meanwhile facebook silicon valley's
golden jewel also wanted a share of the
market well facebook was popular on pc
everyone knew that mobile was the future
so facebook launched the messenger but
it didn't pick up as fast as other
messaging app did
so instead of improving the app
zuckerberg did what he always does just
buy your biggest competitor
in the spring of 2012 combs email inbox
was hit with the following subject line
get together
the recipient was none other than mark
zuckerberg
asking the whatsapp founder to have a
chat over dinner
zach tried to convince acton and comp to
sell whatsapp to facebook for over a
year but the founders didn't rush
however when zach discovered that google
was about to make an offer he got
furious he offered an astonishing 19
billion dollars to acquire a hundred
percent of what's up paying four billion
dollars in cash 12 billion dollars in
stocks and another
three billion dollars in stock grants if
the founders would stay on at facebook
for at least four years the deal made
the founders overnight billionaires and
earned them a seat at the table but not
everything was sunshine and rainbows
facebook had a completely different plan
for whatsapp since it was one of the
biggest names in the industry it made
whatsapp free
users could download the app and no
longer had to pay the one dollar fee
within the next three years whatsapp
users exploded to 1.5 billion users it
was probably facebook's best ever bet
while it looked great from the outside
tensions inside the company were rising
after paying 19 billion dollars facebook
wanted a return on silicon valley's
biggest investment ever they wanted to
include targeted ads within the app and
ease the end-to-end encryption it became
known for to which both founders opposed
the disagreements grew so big that on
september 17 2017
octan announced he would leave what's up
the founders gave up 900 and 400 million
dollars in stock compensation
respectively to show their disagreements
with facebook's management of whatsapp
but that was just the beginning because
what was about to come
almost brought facebook to nice
in march 2018 multiple media outlets
broke the news of cambridge analytica
the company had acquired and used the
personal data of 50 million facebook
users from a third party app facebook
made it extremely easy to third-party
apps to collect your data and your
friend's facebook data without your
knowledge
that infuriated facebook users and
pushed people to stop using facebook by
publicly supporting delete facebook
movement
octon used this opportunity to criticize
facebook despite the scandal that didn't
stop whatsapp from growing especially
when businesses realized that they could
use whatsapp to better connect with
their customers
since the invention of the internet
email has been the dominant way for
companies to interact with their clients
but the problem with email is that that
they're not as comfortable as messaging
is
imagine interacting with your doctor the
same way as you do with your friends
that's where whatsapp business
comes into the picture
while whatsapp might be free for
consumers
it is not for businesses and that's how
facebook decided to make money from its
19 billion dollar investment
get as many people as possible to
whatsapp because wherever people are
businesses will follow
the goal was to have people communicate
directly with their banks airlines
doctors etc
over the app
a charges company is anywhere between
less than a cents up to 90 cents for
every message that's answered after 24
hours
but what attracts businesses more
is data
whatsapp provides businesses with
statistics the tool offers the ability
to sort messages and automate quick
replies as well with its ability to
label chats with customers you can stay
organized and easily find them again and
pick the conversation back up you can
also automate messages such as greeting
messages or an away message
that way you can still provide customers
with quick replies even when you aren't
available in fact businesses can create
a catalog within their business profile
to show off products and services
unlike emails people already check their
whatsapp regularly so interacting with
businesses on the same platform just
increases the engagement rate
significantly
more than 50 million companies are
already using whatsapp in their customer
communication
forbes estimates potential revenue to be
five billion dollars and the average
revenue per user to be four dollars by
2020.
there might not be ads on whatsapp but
whatsapp users are almost the same as
facebook users the only difference is
that whatsapp has access to your
contacts camera location and a lot more
than facebook does
since people don't generally trust
facebook but don't mind giving their
data to whatsapp
whatsapp might claim that they don't
misuse people's personal information but
judging by zack's personal records he
doesn't care about personal data until
it turns into a scandal and even then
nothing significant changes
facebook can use the data from whatsapp
and create more targeted ads therefore
charging more for its ads so whatsapp
might not be earning much but it
increases facebook's overall revenue
however this is just the beginning
because facebook's plans for whatsapp
are just starting
have you ever heard of wechat it is
china's super app you simply cannot
exist in china without wechat it is the
to go app not just to chat but to order
a cab shop call the police make a doctor
appointment order a delivery and even
use it as a payment system
which it has combined in it uber
craigslist news zillow games and
everything else you use on the internet
wechat is the internet in china and that
is what whatsapp is striving to become
at least that's what zach's plan is
whatsapp has been working on a payment
product since 2018.
in june 2020 it is finally launched a
payment service in brazil that allowed
users to pay each other as well as other
businesses on the platform
unfortunately around 10 days later
brazil's central bank suspended the
launch mastercard and visa whatsapp's
payment partners were asked to spend any
money transfer within the app
despite the fact that 1.2 billion people
use whatsapp each day for around 4 hours
whatsapp is struggling to become like
wechat because of its association with
facebook
facebook was launched in 2004 when mark
zuckerberg was still a teenager and
after multiple mistakes and privacy
scandals that facebook went through over
the last two decades
it is very unlikely that whatsapp could
one day turn into a wechat