How does Whatsapp make money?

WhatsApp was purchased for $19 billion by Meta (FB), formerly Facebook, in February 2014, and according to the 2014 Facebook Form 10-Q, WhatsApp produced revenue of $1.29 million in the nine months up to September 30, 2014.

WhatsApp has a commercial communication feature in addition to its consumer application (named WhatsApp Business). Companies can:

• Create profiles for their businesses with useful information for their customers (such as an address, email addresses, or a link to their website)
• Contacts should be labeled to help with categorization.
• Messages that are sent automatically and quickly
• Radio and television broadcasts (similar to a newsletter)

WhatsApp Business is a solution designed for small enterprises. If a company has a larger size, it can choose to use WhatsApp's Business API. They can incorporate it into their existing business software thanks to the API endpoint.

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How does Whatsapp make money

How WhatsApp Started?

Jan Kaoum and Brian Acton worked together at Yahoo for 9 years, from 1998 to 2007, before founding WhatsApp in 2009. Both of them applied for positions at Facebook during the time between leaving Yahoo and founding WhatsApp but were turned down.

After purchasing an iPhone in January 2009, the founders felt that the app industry was an untapped sector with room to grow. This was back in July 2008, when the Apple App Store had just been open for around six months.

It wasn't even a messaging app when the original version of WhatsApp was released. Users could only update their statuses, which were visible to others in their network.

After Apple launched Push notifications in June 2009, allowing users to be notified anytime someone in their network updated their status, WhatsApp witnessed a surge in user adoption. Users enjoyed this feature so much that they started using it to ping each other, leading to the app's transformation into an instant mobile messaging service.

WhatsApp version 2.0 introduced the messaging feature, which is currently at the heart of the service, and the service's user base rose to 250,000 users. By early 2011, WhatsApp had risen to the top of the Apple App Store's top 20 apps list.

As the software increased in popularity, the founders began to attract the attention of potential investors. The creators, on the other hand, were adamant that they intended to establish an ad-free product and that accepting venture capital would compel them to compromise on their ideals.

The founders detested commercials and were not interested in ad-based monetization, according to a 2012 post on the WhatsApp blog titled "Why we don't sell ads."

"A large chunk of any corporation that sells ads spends their day tweaking data mining, building better code to collect all of your personal data, upgrading the servers that house all of the data, and making sure it's all being tracked, collected, sliced, packed, and delivered out... At the end of the day, all of this results in a somewhat different advertising banner on your browser or on your smartphone screen.

Remember that you, the consumer, are the product when it comes to advertising.

Our engineers spend all of their time at WhatsApp resolving bugs, introducing new features, and smoothing out all of the kinks in our mission to offer rich, inexpensive, and reliable messaging to every phone on the planet. That is both our product and our passion. Your information is completely absent from the picture. We simply have no interest in any of it."

Despite their aversion to receiving venture capital, the WhatsApp founders accepted $8 million from Sequoia Capital in April 2011, but only after they were assured that the service would remain ad-free.

By February 2013, WhatsApp had surpassed 200 million active users, and Sequoia had invested another $50 million at a valuation of $1.5 billion.

But how did WhatsApp make money in its early days if there were no adverts and no plans to add them in the future?

WhatsApp used the freemium business model in its early days, where the app was free for a year to entice users and then paid a tiny yearly membership price of $0.99 for continuous usage. Many users, on the other hand, never paid a penny to use WhatsApp because the service was automatically renewed when their free trial period ended.

The Facebook(Now Meta) Acquisition

WhatsApp had 450 million monthly active users worldwide in 2014 when Facebook (now META) bought it for $19 billion. In retrospect, the acquisition, like Facebook's acquisition of Instagram, not only helped the firm maintain dominance but also offered it a significant operational advantage in the future. However, Sequoia Capital, which made $3 billion on a $58 million investment, was the instant winner of this deal, not Facebook.

If you're wondering why WhatsApp's founder went forward with the deal, one of the reasons was that Facebook wanted WhatsApp to be able to function independently and pursue its goal. Following the acquisition, the creators wrote on the WhatsApp blog,

"Today, we're announcing a collaboration with Facebook that will allow us to keep pursuing that straightforward goal." This will allow WhatsApp to expand and thrive while also providing myself, Brian, and the rest of our team more time to focus on creating a communications service that is as quick, inexpensive, and personal as possible.

For you, our users, nothing will change nothing.

WhatsApp will continue to be self-contained and autonomous. For a small fee, you can keep using the service. You can continue to use WhatsApp no matter where in the world you are, or what smartphone you’re using.

And you can still count on absolutely no ads interrupting your communication. 

WhatsApp Becomes Free for All Users

The next major development in the WhatsApp tale occurred in January 2016, when the service was made available to all users for free. The founders of WhatsApp spelled out their new strategy for financing WhatsApp, which, predictably, did not include ads, in the same blog post that stated WhatsApp will no longer charge money to customers.

"Of course, people are wondering how we expect to keep WhatsApp running without subscription fees, and if today's news means we're bringing in third-party adverts." No, that is not the case.

We'll begin testing technologies this year that will allow you to utilize WhatsApp to communicate with businesses and organizations you wish to hear from. That could involve speaking with your bank to see whether a recent transaction was fraudulent, or with an airline to see if a recent flight was fraudulent.

Facebook Begins to Leverage WhatsApp Data

WhatsApp had a busy full year in 2016. After making WhatsApp free for users, the company adopted end-to-end encryption in April 2016, which meant that no one, including WhatsApp, could access the content of users' communications.

In August 2016, the Facebook power grab was ultimately revealed in the form of a WhatsApp privacy policy update, which informed users that some of their data will be shared with Facebook's parent corporation.

WhatsApp announced in a blog post why the privacy policy was being amended, saying, 

"By working more closely with Facebook, we'll be able to measure basic stats about how often people use our services and fight spam on WhatsApp more effectively." If you have a Facebook account, Facebook can also improve friend suggestions and show you more relevant adverts by connecting your phone number to their servers. You might, for example, see an advertisement from a company you currently work with rather than one from someone you've never heard of. More information, including how to control the use of your data, may be found here."

With WhatsApp having operated independently for two years following the Facebook acquisition and no plans to run adverts on the platform, the privacy change was more about Facebook cashing in on the deal than it was about WhatsApp being able to measure user metrics and combat spam.

The one bright spot in this story was that WhatsApp affirmed that end-to-end encryption was still in place and that neither WhatsApp nor Facebook would be able to read user communications.

The Founders of WhatsApp leave 

When Facebook bought WhatsApp in 2014, not only were the founders promised that they would be able to function freely, but Zuckerberg also promised that they would be under no monetization pressure for the following five years. However, the push to monetize came sooner than expected, causing confusion over how WhatsApp will be monetized.

While Facebook wanted to include advertisements in WhatsApp, which had previously been adamantly anti-ads, Brian advocated a metered-user model, in which users would be charged after a specific number of messages were sent.

Brian's proposal was rejected by Facebook, prompting him to leave in September 2017 without even waiting for his shares to the vest, resulting in a loss of $850 million. Jan Koum followed in his footsteps, departing in April.

How does Whatsapp make money? 

1. WhatsApp For Business

Facebook had new WhatsApp plans. The company introduced the WhatsApp Business app, which allows users to create a business profile and become a verified WhatsApp business. Verified firms can create a business profile with vital connections to their website or Facebook page, set up autoresponders, connect their landlines to WhatsApp, and incorporate the WhatsApp for Business API into their product offering.

For now, all organizations can download and use the WhatsApp Business program for free. WhatsApp, on the other hand, profits from the WhatsApp for Business API.

2. WhatsApp Pay 

WhatsApp has added a payment option (P2P payments) to the program for Indian users, bolstering its market position and making it a favored method of exchanging money (just like Venmo in the USA). This will help WhatsApp's operations in the United States, which is the company's largest market.

3. Indirect Revenue from ‘Click to WhatsApp ads

Apart from WhatsApp For Business and WhatsApp Pay, WhatsApp also makes money through Click to WhatsApp ads, which are ads that redirect users from Facebook to WhatsApp. These ads are not shown on Facebook or on WhatsApp.

Because these ads do not appear in the WhatsApp app, attributing their earnings only to WhatsApp would be wrong; rather, it is one of the ways in which Facebook uses WhatsApp to raise revenue.

WhatsApp Funding, Valuation & Revenue 

Five ex-Yahoo! friends were granted co-founder status and contributed $250k to WhatsApp's first round of funding.

Sequoia Capital led the second and third rounds of fundraising, investing a total of $60 million in WhatsApp Inc. ($8 million in 2011 and $52 million in 2013). For the 50 WhatsApp employees, this was their only source of income. The cost of running the program was little; the key cost was the cost of delivering a verification code to users.

This is why the $1 subscription cost was waived by WhatsApp.

 After two years of courtship by Facebook CEO Mark Zuckerberg, WhatsApp was acquired by Facebook in February 2014 for $19 billion, and all of the workers were transferred to Facebook's payroll, including Koum, who is now a member of the company's board of directors.

Forbes increased its revenue predictions for WhatsApp in November 2017, ranging from $5 billion to $15 billion, with an average income per user of $4 to $12.

Even though WhatsApp's earning potential is still far from being reached, the product is likely to contribute more to its parent company's basic revenue in the coming years.

Conclusion

WhatsApp has grown to become one of the world's most popular messaging platforms, with plenty of possibilities for expansion. Whether you think Meta paid too much for WhatsApp or not, the truth is that the app has a growing revenue stream with unlimited possibilities that will allow it to generate more cash over time.

FAQ

1. Who pays for WhatsApp?

WhatsApp used to rely on a subscription model to make money. It cost $1 to download and $1 every year after that. The $1 fee was eventually abolished, and WhatsApp became a free service, with the notion that consumers would use it to interact with businesses, and businesses would cover the cost.

2. How does a free app make money?

Advertising, in-app purchases, sponsorship, and affiliate marketing are all methods used to monetize free apps.

3. Does WhatsApp sell your data?

WhatsApp collects a lot of information about you, including your phone number, geographical information, user habits, and contacts. WhatsApp maintains that it solely utilizes this data to enhance the user experience.