How Does WhatsApp Make Money?

When was the last time you have used SMS for chatting purposes with someone… Umm, you won’t remember, right? As per reports, SMS revenue was dropped by $23 billion, for this one of the main reasons is WhatsApp! WhatsApp was started as an alternative to SMS, now they support sending and receiving a variety of media as well as voice calls. WhatsApp was founded by two ex-Yahoo employees named Brian Acton and Jan Koumin 2009, but later on, acquired by Facebook in 2014 at an overestimated valuation of $19.3 billion. Currently, WhatsApp is used by more than 1 Billion people in over 180 countries and it’s true that  WhatsApp is a pun on the phrase “What’s Up”.

Business Model before Acquisition:

Before the Facebook acquisition in 2014, WhatsApp’s major revenue source was 1$ fee structure where a user has to pay 1$ after one year of free usage. But they are not so rigid on this structure as they allow people to use it for free even after one year trial period. As Brian Acton(founder) hates advertisement so they never want WhatsApp to have any advertisement as a source of revenue because he believes that no one likes to open their app just to see ads! As at that time WhatsApp has a small employee base of about 40-50 people, therefore they have easily managed the company from this source of revenue.

Business Model After Facebook Acquisition:

In 2014 WhatsApp has a valuation of about USD 1.5 billion, but Facebook has acquired them for an overestimated valuation of USD 19.3 billion. Soon, after the acquisition, Facebook has removed the 1$ fee structure from WhatsApp and made it free to use forever. But always remember “If you are not paying for the product then you are the product”. This saying seems true in the case of all major Facebook products either it be Instagram, WhatsApp, or Fb itself! Currently, they are not making directly any money from WhatsApp but they use our data (Chats & Shares) to know our interests, likes, and dislikes. So, that they can make better-targeted ads and offers placement for us on Facebook and Instagram. 

WhatsApp legal info showing details of using personal data.

You can read Complete WhatsApp legal info in more detail on their website(here). Also, as per Forbes, it was estimated that the average revenue per user will reach 4$ by 2020 which makes up to a total of USD 5 billion in revenue for WhatsApp. Also launching of WhatsApp Business App may open up new revenue streams for Facebook. WhatsApp Business App was built to target the small business owner where they can chat with their customers and also automate, sort, and quickly respond to Their messages. Recently, Facebook has integrated payment options in WhatsApp as a beta version in India, which may emerge as a major revenue stream for WhatsApp in the future. A similar case can also be seen with Wechat (Chinese WhatsApp 🙂 where they handle transactions of more than 2$ Trillion in China. So, now one can easily see WhatsApp’s future earning potential!

Possible Reasons for Acquisition:

These are the major possible reasons for the acquisition: Facebook acquired WhatsApp to eliminate competition as it may cause a threat to Facebook’s product portfolio due to the huge user base of WhatsApp.

Source: Statista

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