How Does WhatsApp Make Money?

How Does WhatsApp Make Money Without Any Ad and Subscription Fee

Jan Koum and Brian Acton developed WhatsApp in the early months of 2009 as a Status update application (hence named WhatsApp). It is a Facebook-owned messaging application that provides service to more than 1 Billion users worldwide. But how does WhatsApp makes money without any ads in it?

  • More than one billion people are now using WhatsApp every day in the world.
  • Currently, 55 billion messages are being sent each day.
  • Nearly 4.5 billion photos are being sent each day.
  • Currently, it supports 60 languages​ all over the world.
  • It is not like a traditional SMS app; it has many more useful features.
  • WhatsApp is increasing and expanding at every moment.

But how does WhatsApp earns?

The founders of WhatsApp hated advertisements and created it as an ad-free platform focusing just on excellent user experience and interface, so it doesn’t earn revenue through ads. The purpose was to develop an instant messaging platform for the users and not for big companies. But they had to pay their bills too as well. So a paid version of the application came up where an annual fee of $1 was charged from the users.

After buying WhatsApp, Facebook’s revenue has increased in a multifold. Facebook knows everything about us; even if we don’t see that information about ourselves, we sometimes forget those small incidents. They have made an extensive database from WhatsApp. They can thus serve interest-based advertisement now.

Let’s discuss it more:

  • Facebook knows about your pieces of information.​
  • It knows about our relationship status and our families.
  • It knows what we like and dislike.
  • It knows what kind of activities we are doing each day, we might forget about those activities, but Facebook keeps it in mind.
  • It even knows about our mental and emotional situation. Sometimes we might ignore all those things, but Facebook will not. It records all these small things in its database system.
  • It knows what we want and what we do not want in our day-to-day life.
  • It knows where you go and why you go; it follows our internet location services, group activities, and status updating.
  • Its ad performance is the best globally. It is selling a total of 100% target and interest-based ads.

Facebook has new plans for WhatsApp as the company has launched a WhatsApp business application that lets its users build their business profile and become a verified business on WhatsApp. The verified businesses can create their business profile, add certain vital links to their website or Facebook page, set up autoresponders, and link their landline numbers. The WhatsApp Business application is free to download currently and is being used for small businesses. However, we can expect individual in-app purchases and Whatsapp to adopt a premium option in the coming future.

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The company has also introduced a payments option within the application for all Indian users, further boosting its position. This will make it a preferred application for sending and receiving money.

WhatsApp pricing?

When WhatsApp first started, they charged a $1 a year subscription. It also offered the first year for free.

However, since 2016, WhatsApp has become entirely free for everyone.

WhatsApp made very little money than their user base, as the service remains free and free of ads till 2018. Facebook reported in 2014 that WhatsApp made approximately $1.2M on its subscriptions.

Following Facebook’s acquisition, it doesn’t seem like WhatsApp has a significant need for making money soon.

WhatsApp Future Revenue Plans

The Facebook motive behind WhatsApp’s acquisition is clear: they will gather more and more data from you, such as conversation patterns, behavioral information, your entire contact list, live location, and much more.

Facebook can, in turn, use this data to provide even better-targeted advertising.

Payments

WhatsApp introduced a Peer-to-Peer (P2P) payments solution in India using the country’s Unified Payments Interface (UPI). WhatsApp allows all its Indian users to transfer money instantly between bank accounts at zero charges.

This move will help them compete directly with India’s Paytm and Google’s Tez and solidify their market share.

Does it make sense for Facebook to pay WhatsApp an amount of $19B?

Most of us think it’s absurd after seeing a $19,000,000,000 price tag.

However, that sum might make sense if we begin to analyze how much revenue competitors like WeChat and Line bring each year.

WeChat and Line show advertising, in-app purchases, offering payment solutions, and more, and that’s how they monetize.

What we can expect from WhatsApp is to follow a similar monetization strategy.

In 2017, there was an estimated average revenue of $7 per user (ARPU) for WeChat and Line; it was around $9.

If we start to assume that WhatsApp can pull a similar ARPU of $7-9 per user, we will talk about $10-13.5B of yearly revenue once they start to monetize.

The WhatsApp acquisition of $19B could pay for itself within just some years of turning on its monetization engine.

WhatsApp was also an excellent acquisition from Facebook besides this simple math, preventing any other competitor (like Tencent) from getting their hands on it.

WhatsApp doesn’t yet monetize heavily but will do so shortly with its business products.

Written by: Mannat Manuja, LinkedIn

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