How does WhatsApp, which offers its service for free, generate revenue? Does WhatsApp actually make any profit from the services that it offers?
We’ve done the legwork for you and compiled everything you need to know about WhatsApp’s business model and all the answers to “How does WhatsApp make money”
How Does WhatsApp make Money?
WhatsApp’s business model generates revenue from a number of sources, including WhatsApp for Businesses API, WhatsApp Pay, and selling WhatsApp user data to third parties!
Let’s take a closer look at each of these potential WhatsApp revenue streams:
WhatsApp Business
When it comes to communicating with customers, WhatsApp Business is a fantastic tool, especially for small and medium-sized business users.
It’s similar to a virtual storefront where you can have conversations with customers, update them on the order progress, answer their questions, and even have some of your responses automated.
More than 2 billion people use this app every month, making it an invaluable asset to any company’s communication strategy — hence proving how strong the whole idea is!
As for how Meta makes money off of it, well, it’s completely free to use, just like every other WhatsApp app feature. In fact, the WhatsApp Business API is the primary source of income for the firm.
The whole monetization model is based on 2 simple categories —
User-initiated conversation: This is when a customer starts a conversation and a business responds within 24 hours — here the business can send messages for free.
Business-initiated conversation: This is when a business starts a message outside of the 24-hour window.
Therefore, all messages are free to send during the first 24 hours, but after that, businesses must pay a fee based on the user’s country code.
There is a catch, though: the first 1000 messages you send and receive each month are free. There is no cost or time limit for either users or business owners to use the app.
Source: Facebook
In this pricing tier stricture, as the message volume increases, your unit cost per message decreases — making WhatsApp API (Business API) a well-thought-out strategy!
WhatsApp Pay
Next in the line is WhatsApp payment services a.k.a. WhatsApp Pay which is pretty much similar to payment services like Google Pay, Stripe etc.
WhatsApp Pay is a fun and convenient way to send and receive money to friends, family, and businesses. All you need to do is link your bank account to the WhatsApp app, and you’re ready to go!
When it comes to monetization — WhatsApp Pay is completely free for consumers to use, while merchants pay a flat 3.99% transaction fee.
Selling user data
It is speculated that WhatsApp makes money by selling user data to third-party companies, though this is not known with certainty.
Actually, there have been numerous reports of user data being leaked in the past, so this could be a true and potential source of income for WhatsApp and Meta in general.
Now let’s talk about how useful these user data are to businesses — by gathering information on users’ online behaviors, demographics, and preferences, businesses can paint a complete picture of each user and execute targeted advertising as a result.
Both the business and the advertisers benefit from this arrangement; the former gets their message out to an attentive audience, and the latter receives a hefty amount in return!
How much money does WhatsApp make?
With more than 2 billion users and widespread use in more than 100 countries, WhatsApp messenger has earned the title of the most-used instant messaging app, especially in India where it has the highest user base (a staggering 487.5 million headcount)!
Given how impressive the user base and usage numbers are, it is safe to assume that the revenue statistics won’t be any less impressive.
Individuals can use WhatsApp for free, the company’s primary revenue source is only from WhatsApp business.
According to reports, WhatsApp generated $906 million in revenue in 2022, almost entirely from the WhatsApp Business application!
Source: Business Of Apps
Over the years WhatsApp’s revenue has seen a clear upward progressive graph, just like its user base. Its total revenues have increased by 104% in just 4 years, from $443 million in 2018 to $906 million in 2022!
As Forbes once said, “WhatsApp could generate anywhere from $5 billion to over $15 billion in the coming years if Facebook can implement effective monetization strategies”!
Given that WhatsApp has added other new money-making streams into its revenue model, like WhatsApp Pay, we can definitely expect this revenue number to go much higher in the future!
Future Money Making Strategies
WhatsApp as a platform and Meta as an organization have some of the brightest minds at work, so without a doubt that they will soon come up with innovative money-making strategies in the future!
The following are some of WhatsApp’s top future real money-making techniques:
- In-app Purchases: WhatsApp could allow users to make in-app purchases for additional features or for virtual goods within the app.
- WhatsApp Ads: WhatsApp has an excellent opportunity to earn some really good ad revenue by monetizing its highly active user base by selling advertising space to companies.
- Subscription Fees: WhatsApp could implement a subscription-based WhatsApp business model, giving users access to ad-free service and/or more space to store media files, among other benefits.
- Paid Stickers and Emojis: WhatsApp could add a new source of income by allowing users to buy premium stickers and emojis.
- Premium Group Features: Extra tools for group admins, larger group sizes, and similar premium features are all ideas that WhatsApp could implement for its users.
It is worth noting that the points mentioned above aren’t some out-of-the-box ideas but rather are simple ways by which WhatsApp can 10x its revenue number — everything with just the right strategies and execution!
WhatsApp Funding and Valuations
The very beginning of the funding journey for WhatsApp can be traced back to October 1, 2009, when the company received its initial funding in a seed round. The staggering sum of $250,000 was used to fund the company’s initial idea.
Following that, approximately one and a half years later, WhatsApp received a series A funding of an astounding $8 million from Sequoia Capital on April 8, 2011!
So when it comes down to funding, Sequoia Capital is the company that backs WhatsApp, the industry giant. In total, WhatsApp has raised $60.3 million across three funding rounds. Their latest funding of $52 million was raised on Jul 1, 2013, from a Series B round!
Now coming to WhatsApp’s valuation, Facebook Inc. (now called Meta) paid an astounding $19.6 billion to acquire the company — making it Facebook’s largest acquisition to this day!
This valuation has skyrocketed in recent years, and it is currently estimated that WhatsApp’s valuation will be greater than $98.56 billion in 2023!
History of WhatsApp
Over the course of its more than 14 years in existence, WhatsApp has experienced both commercial success and failure, as well as a fair share of drama.
Let’s take a look at how WhatsApp has evolved over the years.
Who Founded WhatsApp and Why
WhatsApp was created in 2009 by Brian Acton and Jan Koum, two ex-Yahoo employees who recognized a need for a more user-friendly, efficient, and secure mobile messaging platform.
Jan Koum, the WhatsApp founder’s desire to stop “missing calls on his new smartphone” was the impetus for the founding of the concept that eventually led to the starting of WhatsApp.
Particularly in countries where SMS (text messages) was more expensive than other forms of communication, the app shot to popularity.
By 2014, WhatsApp’s user base had grown to be among the largest of any messaging app in the world!
Facebook acquisition
When Facebook acquired WhatsApp on February 19, 2014, it became the largest technology acquisition in history and was one of the most talked-about events of the year.
In order to acquire the popular messaging app, which at the time had more than 400 million users, Facebook agreed to pay $19 billion in cash and stock.
The $19.6 billion final acquisition price was determined by factoring in $3.6 billion in retention bonuses for WhatsApp employees, in addition to the original purchase price of $16 billion ($4 billion in cash and $12 billion in Facebook shares).
This was a risky move for Facebook, as many predicted that the app’s purchase would end up costing Mark Zuckerberg money.
Nonetheless, Facebook went ahead with the acquisition to increase its presence in developing nations and capitalize on the rising popularity of instant messaging.
Since the acquisition, WhatsApp’s user base has grown and expanded to over 2 billion monthly active users, further increasing Facebook’s power and weightage as one of the largest technology companies in the world.
Promises Made After Facebook Acquired WhatsApp
Mark Zuckerberg made it a priority soon after acquiring WhatsApp to assure and reassure users that the app would continue to respect their privacy.
He firmly stated, “We are absolutely not going to change plans around WhatsApp and the way it uses user data. WhatsApp is going to operate completely autonomously.”
But these assurances have worn thin as new policy updates have been released nearly annually, forcing users to either accept them or stop using the app.
WhatsApp also promised “no ads, no games, and no gimmicks,” as per the company’s original pitch — which in fact is the differentiating factor of WhatsApp as compared to other social media platforms.
As reported by Mashable, “Mark Zuckerberg is doing exactly what he promised Instagram and WhatsApp he wouldn’t: messing with their independence by creating one system to rule them all”. — indicating that all of Zuckerberg’s promises were weak!
