How Does WhatsApp Make Money?
WhatsApp is the world’s most popular and widely used messaging service at the moment. It has over a billion user accounts, which amounts to roughly one-sixth of the population of the world. The messaging service was developed way back in 2009 by Brian Acton and Jan Koum. The initial idea behind the app was that of a status update app, which a revolutionary idea was at that time. But, the idea evolved into a full-fledged messaging service, which came to be known as WhatsApp. Since its inception, the app has seen a meteoric rise in terms of the number of users. It was acquired by Facebook and has since been included in the Facebook family of apps, along with Instagram.
One of the key features that have been a part of the WhatsApp identity since its inception is its devotion to providing an utterly free-to-use experience to its users. This means, WhatsApp doesn’t charge its users any fee, nor does it display any advertisements. It is one of the many core features that has made it the most widely used instant messaging service in the world.
It is said that there has to be some mode of monetization to make every company profitable, and WhatsApp is no exception. Let us look at how WhatsApp earns its revenue.
Initial Funding And Revenue
WhatsApp started with a strong, no ad policy. The founders believed that advertisements are a roadblock inefficient user experience and hence decided to avoid it altogether. Instead, WhatsApp initially had a $1 annual subscription fee, which was nominal. This was charged to keep the company operations running efficiently. The company got its first round of funding from a group of angel investors from Yahoo!, Which amounted to $250,000. This was the initial seed capital that got the company operations off the ground. The next round of funding was much more significant and amounted to $60 million in total. It came from Sequoia capital, over two years from 2011 to 2013.
By this point, these fundings were the only source of revenue for the company, and it was used to keep the day to day operations running, and also covered the salaries of the employees. This is the time WhatsApp waived off its yearly subscription fee and became completely free to use.
Being Acquired By Facebook And The Current Revenue Strategy
The initial goal for WhatsApp was to establish themselves as the front runner and only competitor in the instant messaging market. This meant following a completely free model for nearly 3 years and not generating any significant revenues. However, this model achieved what it was designed to do, establishing WhatsApp as the sole name in the crowded IM market.
Following this, Facebook acquired WhatsApp for a $19 billion valuation in 2014, making it a part of the Facebook family of apps. Once this acquisition was complete, WhatsApp started following the Facebook model for revenue generation. The Facebook model for revenue generation depends on data collection and integration of WhatsApp for business API for commercial entities.
WhatsApp Business is the first revenue-generating avenue for WhatsApp. The concept is pretty simple and efficient to use. Under the WhatsApp business app, a company can create a profile for their business on WhatsApp, and pay a particular fee to do so. This profile can contain all the details about the company and can be linked with their online presence, in the form of website links and connections to other social media. The companies which set up their profiles using WhatsApp business get a verified WhatsApp profile for their business. In addition to linking the profile with the company’s online presence, WhatsApp business can also be used to auto-respond to customers, as well as link the company’s landline numbers to their WhatsApp business account. The monetization aspect of WhatsApp business comes from the API aspect of WhatsApp Business.
What Is API?
API stands for Application Programme interface, and it is one of the key features involved in the working of most applications nowadays. API, at its core, is a platform for multiple applications to use third party resources to streamline their operations. API has become very important in today’s world, as all applications have different aspects available to their users. So if a single app developer had to create all aspects of their application from scratch, it would take a long time, and also be very difficult to maintain. Instead, they outsource the different components while developing the core components themselves. This allows them to better retain the day to day operations for its users. A typical example that can be given is the usage of Google maps by applications such as Uber, Ola, and Zomato. Instead of developing their map interface, they use a third party map interface, i.e., Google maps, which are already developed.
How Does WhatsApp Business API Help Generate Revenue
The WhatsApp Business API essentially helps the businesses using WhatsApp to automate their entire customer interaction process. The company primarily uses the WhatsApp system to reach out to their extensive database of customers quickly, allowing them to convey relevant notifications and reminders, among other things, directly to the customer’s WhatsApp chat.
Even with the WhatsApp Business API, user convenience is something that WhatsApp has kept at the forefront of their operations. Unlike email spams, any company cannot send you spam texts on WhatsApp. A user has to text the company first for the company to be able to send messages to that customer. This helps in preventing ad spams by companies.
The main utility of the WhatsApp Business API is the ability it provides to companies to convey important information to its customers, directly and automatically. This information can include answers to queries, offers, shipping details, or booking confirmation. The WhatsApp app earns money through a standard process as the companies can send a limited number of texts in a certain period, say 24 hours. After this period is over, the company is charged a certain amount by WhatsApp for every text it sends to its customers. The charge varies from region to region but is fixed for every company in that particular region. The companies choose this option because it helps them reach out to thousands, or even millions, of their customers at the same go, which justifies the price they have to pay for sending each text.
One of the latest features to be added to WhatsApp has been its payment feature. It is also one of the newest monetizing avenues that WhatsApp has adopted after it’s WhatsApp business initiative. The payment feature has been tested in the Indian market, and it works on the same principle as most other e-wallets. The USP of the WhatsApp wallet is that it is integrated with the WhatsApp messenger, meaning you can easily send money to your WhatsApp contacts without having to use another third-party payments app.
WhatsApp has declared it has significant plans to roll out the WhatsApp payments feature on an international basis, following its test run in the Indian market. This is likely to make additional inroads for WhatsApp business to more mainstream companies, as the payments feature integrates perfectly into the utility of the WhatsApp Business app.
Newer Revenue Avenues
Apart from the above-discussed revenue systems which are already in place, WhatsApp has several newer avenue streams in the pipelines. Out of them, one proposed revenue stream is particularly interesting. Recently, WhatsApp added the feature of stories or statuses, which disappear after 24 hours. Other apps such as Snapchat, which first came up with this feature, have monetized this feature by allowing companies to advertise through these disappearing stories via influencers. WhatsApp plans to follow suit by allowing products and companies to be advertised and linked in the stories that are put up.
It is sure to be a successful setup, as more and more companies are relying on social media advertising to gain quick popularity and reach a broader range of audiences for relatively less cost. It is becoming a much better alternative to advertising on mainstream print or television media, as these often come with high operational costs. However, with social media such as WhatsApp, a targeted audience can be reached much more quickly through influencer profiles or the business profile itself. This makes advertising through these media much more cost-effective.
WhatsApp has done a phenomenal job of gaining the number one spot in the instant messaging industry. While most of its initial competitors have fallen by the wayside, WhatsApp has stayed true to its core principles of customer satisfaction and zero ad policy. This has led to WhatsApp developing a vast and dedicated user base, which it has now started to monetize. The WhatsApp business and it’s API has been a tremendous success, as multiple companies have successfully embraced it in their day to day servicing. The WhatsApp payments option has also had an unbeaten test run in the Indian market and is well on its way to be released worldwide. With multiple new monetizing avenues in the pipeline, WhatsApp can only be expected to go from strength to strength in terms of revenue shortly.