- Over 1 billion people are using WhatsApp every day.
- There are a total of 1.3 billion monthly active users on Whatsapp.
- An average user sends 1,200 messages per day.
- 200 million voice messages are sent through Whatsapp per day.
Whatsapp is a free instant-messaging mobile and web-based application or service used to send and receive text and voice messages, voice calls, media, and video calls as well.
The application was launched in January 2009, acquired by Facebook in 2014 for $19 Billion, and hit a 1 billion user base in 2016.
Whatsapp application works on iPhone, Android, and other smartphones including web-based desktop version as well.
The messages sent across using the application are end-to-end encrypted which means no one except the sender and receiver can read the messages.
- How Whatsapp Got Started?
- How Facebook Acquired Whatsapp?
- When Whatsapp Went Free For All Users?
- Why Is Whatsapp Not Selling Ads?
- Does Whatsapp Sell Your Data To Companies?
- How Does Whatsapp Make Money Now?
- How Much Money Does Whatsapp Make?
- Why Whatsapp Cannot Make More Money Than Facebook?
How Whatsapp Got Started?
Jane Kaoum and Brian Acton are the founders of this instant-messaging application Whatsapp.
Before the foundation of Whatsapp in 2009, both founders worked in Yahood for 9 years.
Brian Actor revealed how both of them were rejected by Facebook when they applied for a job in 2009.
After purchasing the iPhone, the founders have realized that there is an opportunity in this untapped market.
The first launched version of Whatsapp wasn’t even called to be a messaging application.
Users are only allowed to update their statuses which other people connected to their network can see. Whatsapp gained momentum after the launch of push notifications by Apple in June 2009.
This push notification was about users getting pinged whenever someone in their network updates their status.
The messaging feature of Whatsapp was brought as Whatsapp version 2.0 where it successfully achieved to grow the users over 250,000.
At the start of 2011, Whatsapp became the top 20 applications of the Apple app store. That was when the potential of the application began to shape.
An increase in the popularity of the application brought more and more interested investors to Whatsapp founders.
But the founders weren’t interested in those deals, and are resistant because they wanted to create an ad-free application dedicated to the users.
Early Revenue Generation Strategy
One of their primary motive behind creating the application was their annoyance with ads on applications.
Since they always disliked the ads, they were into the favor of ad-based monetization for Whatsapp.
However, in 2011, Whatsapp accepted $8 Million from Sequoia Capital on the assurance that the application will be kept ad-free.
Just by February 2013, the application had grown to have around 200 million active users where Sequoia invested another $50 million at a $1.5 billion evaluation.
Now, how did WhatsApp make money initially without ads?
Whatsapp makes money in its initial days by relying on the popularly known freemium business model. The application was free to use to attract more users and then charge the yearly subscription fee of $0.99 to continue the service.
How Facebook Acquired Whatsapp?
Facebook bought Whatsapp for $19 Billion in 2014 which is the largest acquisition that Silicon Valley has ever seen.
At the time of the acquisition, WhatsApp had over 450 million monthly active users around the world.
$4 billion in cash and the rest $12 billion was as Facebook shares were asked by Whatsapp in the acquisition.
Facebook paid the gigantic sum of $19.6 billion followed by an additional $3.6 billion to compensate the Whatsapp employers for staying aboard.
The Facebook acquisition of Whatsapp doesn’t only help Facebook retain its dominance in the digital market but also profited Whatsapp in great ways.
Like the acquisition of Instagram by Facebook, here also the acquired party, Whatsapp get to have a significant and sizable operation advantage to thrive in the future.
The instant win went for not Facebook or WhatsApp but Sequoia Capital as they made $3 billion from their investment of around $58 Million.
Source: Whatsapp Blog
Whatsapp founders agreed to this deal because they didn’t have to compromise any of their principles or vision for the application.
The founders proudly acclaimed that Whatsapp continues to be autonomous and operate independently.
Even they wouldn’t change their initial “no ad-based monetization” principle at any point after this acquisition.
So Whatsapp or Facebook didn’t have to go through any compromise on their vision, product, or goal to make this deal happen.
When Whatsapp Went Free For All Users?
In 2013, on 13 July, Whatsapp was introduced and available to use for free but with an annual subscription of $1 starting after 1 year.
But, in January 2016, the messaging application went free for all users. They decided to no longer charge a $1 for their yearly subscription as well.
Whatsapp founders laid out a new monetization vision for the application as connecting with other businesses and organizations.
They basically mentioned how WhatsApp can offer their services to businesses around the work for their communication with end-users.
It was again made clear that Whatsapp won’t go for third-party ad integrations to monetize the application.
Why Is Whatsapp Not Selling Ads?
Whatsapp revenue model is not based on advertisements. It doesn’t earn any revenue through running ads.
According to the Whatsapp Blog, the founders of the application hated the advertisement as it hinders user accessibility and comfort.
Image Source: Whatsapp Blog
They wanted to create an ad-free communication platform to provide a great user-friendly experience and easy interface.
The idea behind Whatsapp was to cater to the end-users instead of large corporations to place their ads.
However, to make this sustainable, they eventually decided to charge $1 for the paid version of the application.
It was the annual fee of $1 per user all they charged for Whatsapp.
Does Whatsapp Sell Your Data To Companies?
According to major speculations, database management could be the primary revenue generation source for Whatsapp to make money without ads.
Chances are that WhatsApp is backing up all the conversations made on the platform on their servers.
Conversations reflect interests, likes, dislikes, preferences, ideologies, opinions, and a lot more into consumer behavior and psychology as well.
This information is highly valuable for giant companies developing, offering, and targeting certain customers.
Such information helps to customize the product, develop a more effective marketing and sales strategy, and connect with customers at a more personalized level.
Whatsapp has the largest user base as compared to their other messaging platform competitors, even some social media platforms.
So selling information to large companies can bring huge cash flow adding to their revenue.
However, Whatsapp leveraging user data to generate revenue is merely speculation. There is no such reportings, announcements, or evidence to support this.
Also, Whatsapp is not up for ad marketing as they have clearly stated since their inception.
Even WhatsApp CEO Jan Koum stated that Whatsapp is made for instant messaging, so advertisement placement will affect its sole purpose.
He discards the data management revenue, model.
How Does Whatsapp Make Money Now?
There are two primary sources of making money for WhatsApp –
- WhatsApp for Business API
- Clicks on the WhatsApp ads
The Whatsapp business app is free to use for the business owners and brands, however, Business API functionality is monetized.
Tech giants and brands like Netflix use WhatsApp business API to communicate with their customers.
WhatsApp Business API
WhatsApp charges costs for slow replies to these registered companies. Businesses can respond to their customer messages for free but only upto 24 hours.
For every delayed message, a small fee charged by WhatsApp varies demographically.
Customers prioritize Whatsapp for communication with businesses as it tends to be faster and easier, also they get quick replies.
WhatsApp starts charging for more after a certain threshold or limitation of messages once customers and businesses get used to utilizing Whatsapp for their primary communication.
WhatsApp also makes money through the clicks on WhatsApp ads. Now, these ads are not what you see on Facebook or WhatsApp.
These ads are particularly to redirect users from Facebook to Whatsapp.
Since these ads are not shown on WhatsApp, so it surely not a primary or significant source of revenue for them, but surely amongst one.
It is also a way how Facebook leverages Whatsapp to create another stream of revenue.
How Much Money Does Whatsapp Make?
Facebook is the parent company that owns Whatsapp.
Since they never share their revenue breakdown or annual revenue reports in the public about any product, there is no data on their actual revenue.
However, according to 2014 Form 10-Q, the paltry revenue Whatsapp generated was $1.28 million but that was long ago when they were charging $1 per user after a year.
One of the other speculations around the total revenue of Whatsapp goes for Forbes prediction.
They predicted that the average revenue Whatsapp generates per user would be $4 by 2020, and that can give the push to Facebook for reaching $5 billion of revenue.
However, the prediction didn’t go well as Whatsapp acquired a 1.3 billion total monthly user mark by midway 2017 which was expected to hit in 2020.
So, Forbes again made their revenue estimation in November 2017 for Whatsapp predicting it to be ranging between $5 billion to $15 billion.
They also estimated the average revenue per user to be ranging from $4 to $12.
The Forbes latest estimation of $5 billion- $15 billion in 2017 considering the generous increase after years, considered to be the best guess so far.
Why Whatsapp Cannot Make More Money Than Facebook?
In comparison with Facebook which is a popular social media networking website, Whatsapp still is just a mobile application, hence cannot make money as much as Facebook.
Also, this makes it difficult for advertisements to show up on Whatsapp mobile application.
Technically, Whatsapp has the potential to generate more revenue than Facebook because users tend to spend more time on WhatsApp than Facebook.
In terms of average time spent on Whatsapp, it outlasts every other social media network website or application.
So according to this, more advertisers should be focusing on running ads on Whatsapp.
And since more and more people are using the Whatsapp web version on their desktop, it can get more space to display more number ads compared to Facebook.
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