How does WhatsApp make money? How can WhatsApp be free? Do they sell data? If WhatsApp is making money then, what are the sources? What are there revenue generation strategies?
At some point, these questions always wonder in every WhatsApp user’s mind. Well, the simple answer will be that they are making money by both direct and indirect methods. Both of these methods are discussed in this post. So, Let’s get started with a short introduction.
WhatsApp was founded by Brian Acton and Jan Koum in 2009. At first, it was the status uploading app as suggested by its name “WhatsApp”, After that, it became the messaging app (in version 2.0) making it an alternative to expensive SMS services at that time. Since then, it was asked that “How does WhatsApp make money?”.
How does WhatsApp make money?
In the beginning, WhatsApp introduced the Annual fee model as a revenue generation strategy (We will come to that later). But, after Facebook bought WhatsApp they dumped the annual fee subscription as a bad strategy for WhatsApp for the future. But, the questions remained unanswered that how do they make money? Did Facebook thought of any advertisements as a revenue generation strategy?.
As obvious, WhatsApp doesn’t make money through any advertisements nor any annual paid subscriptions like it did before Facebook bought it. The founders hated advertisements and they wanted to make it an ad-free platform with great user experience. WhatsApp explained this in their blog post:
“No one wakes up excited to see more advertising, no one goes to sleep thinking about the ads they’ll see tomorrow. We know people go to sleep excited about who they chatted with that day (and disappointed about who they didn’t). We want WhatsApp to be the product that keeps you awake… and that you reach for in the morning. No one jumps up from a nap and runs to see an advertisement.”
According to Scroll.in (WhatsApp earning strategy)
Scroll.in answered comprehensively that “How does WhatsApp earns money?“
Startup revenue generation strategies (Model)
WhatsApp’s first round of funding was $250k from five ex-Yahoo friends. They were granted a “co-founders” status.
Then Sequoia capital (an IT-based American venture capital firm) invested a total of $60 million in WhatsApp. It was the only source of income for 50 staff members of WhatsApp.
This wasn’t enough to run WhatsApp for long, they had to pay their bills which includes their servers and cost for sending a verification code to the user. This is why they waved off the $1 annual subscription fee.
What was WhatsApp 1$ annual subscription fee revenue model?
In some countries, WhatsApp used to cost $1 to download; in others, the first year was free but $1 for each following year. In short, WhatsApp had a 1$ subscription model. With this model, WhatsApp revenue was estimated at $700 million per year as it had 700 million users worldwide. That was how WhatsApp earned money.
In January 2016, Facebook revealed that because WhatsApp was monetized in “a very limited fashion” So it may not generate meaningful revenue in the long run, hinting that the era of annual subscription fee has come to an end and revenue strategy will change and WhatsApp will be free to use.
“Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from. That could mean communicating with your bank about whether a recent transaction was fraudulent, or with an airline about a delayed flight. We all get these messages elsewhere today – through text messages and phone calls – so we want to test new tools to make this easier to do on WhatsApp, while still giving you an experience without third-party ads and spam.
WhatsApp wrote in the blog post. The goal is to have people communicate directly with their banks, airlines, etc. over WhatsApp, while the company pays their bill with previously paid subscription fees.
This gave birth to another application “WhatsApp business”. Which answered the question “How does WhatsApp make money?”.
What is WhatsApp business? (WhatsApp business revenue model)
Facebook builds WhatsApp business application which lets users make a business profile and become a verified business on WhatsApp. They can also add certain important links to their Facebook page, website and can also set up autoresponders. The verified users can also link their landline numbers with WhatsApp and can also set up their WhatsApp Business API with the product offering.
This application is currently free to download and use for all businesses, however, WhatsApp makes money through this application.
WhatsApp business API
Facebook extended its business by launching its first true direct revenue earning product– WhatsApp Business API.
WhatsApp Business API lets businesses integrate for businesses to reach out to their customers and respond to their queries automatically.
To prevent spam, the businesses can’t send messages first. Businesses can only send messages to people who have contacted them first.
The API will help Businesses to send shipping confirmations, appointment reminders and even tickets to their customers. The company’s major clients are booking.com, wish, etc.
how does WhatsApp earns through API?
WhatsApp has developed a strategic revenue generation plan for this product.
It charges businesses for slow replies.
The WhatsApp Business API allows businesses to respond to customers on the platform for free for up to 24 hours, charging a fixed fee for each message after that. The charge varies from country to country.
Businesses can reply manually through WhatsApp business application or different apps like Zendesk, MessageBird, etc.
WhatsApp Business API has over 3 million users now, the company has decided to make more of a profit. Companies will pay somewhere between half a penny and nine cents for each message, according to the WSJ.com
Now, you must be thinking that businesses can always use WhatsApp for Business applications to relay to their customer’s inquiries. But no matter what this technique doesn’t suit most of the businesses with millions of users like airline tickets, travel tickets, etc.
Furthermore; you can’t use WhatsApp business API with any number already associated with WhatsApp. You always have to need a fresh number to use API. That is how WhatsApp earn money through WhatsApp business API.
What is WhatsApp Payment?
In India, WhatsApp tested its first UPI-based payment service (P2P payment) within the application for Indian users. This will further benefit the WhatsApp business in the company’s biggest market.
WhatsApp users can link their UPI-enabled bank accounts and transfer money through the messaging app. WhatsApp supports all popular banks like HDFC, ICICI, State Bank of India, Axis Bank and even Airtel Payments Bank.
In 2019, WhatsApp will launch this service globally as they have explained in their blog post
“Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from.”
How will WhatsApp earn revenue through WhatsApp payment?
Well, Facebook announced that it will start a global digital coin, which will be managed by the governing body called the libra Association and through a wallet service named Calibra. Libra is intended to be used to purchase products or send money internationally. But it can’t launch in India as cryptocurrency is banned in India.
WhatsApp might take service tax for each payment sent through the app and they might use Libra as a bank service itself. Like WeChat did in 2016 with WePay feature that allows people to make transactions through the app, in 2016 WePay processed $50 million (£37.2 million) in bank transactions every month and that is how does WhatsApp make money through WhatsApp Pay?
Is it Really About the Money?
Industry insiders have speculated that part of the rationale behind acquiring WhatsApp was for Facebook to access user’s behavioral data and personal information.
With location sharing data, 60 billion messages sent per day and access to users’ entire contact lists, Facebook has access to a ton of personal information – all uploaded and saved on its servers. While Mark Zuckerberg has previously promised that this data won’t be used to improve consumer targeting in Facebook ads, it will be unless the user changes the settings to not share information with Facebook.
Though WhatsApp’s financial statements aren’t public (Facebook doesn’t break down its revenue by the company), Forbes estimated total revenue to be $5 billion and the average revenue per user to be $4 by 2020. As of February 2018, WhatsApp had over 1.5 billion users and 60 billion messages sent per day, according to Facebook CEO Mark Zuckerberg in a Q4 2017 conference call.
Whether you believe that Facebook overpaid for WhatsApp or not, the fact is that the WhatsApp has a growing revenue stream with more room to grow.
I hope this post answers your question about how does WhatsApp make money. If you have any suggestions regarding this question then, I am open to you. Please discuss your opinions in the comment section.