How Does WhatsApp Make Money?

How Does WhatsApp Make Money?

WhatsApp is a free instant messaging app that’s used by millions of individuals and businesses around the world. Here’s the thing, unlike thousands of other free apps available on mobile stores, WhatsApp is worth billions of dollars, which raises the million-dollar question (pun intended); how does WhatsApp make money?

WhatsApp: The Beginning

WhatsApp was created a decade ago, on February 4, 2009, when Brian Acton and Jan Koum noticed that SMS services are too expensive for family and friend messaging.

It started as a basic text messaging app, but soon expanded into media sharing by adding several features such as photo sharing, voice messages, read receipts, etc.

WhatsApp started with a very limited userbase, as people didn’t think the idea is so brilliant at first, but users kept coming in slowly. By 2013, WhatsApp has over 200 million active users, mainly from the states.

WhatsApp in Numbers

  • Brian Acton and Jan Koum founded WhatsApp in 2009.
  • During its first year, WhatsApp got an initial $250,000 investment from Yahoo! Investors.
  • WhatsApp joined the Facebook app family in 2014 when the social media giant bought it for $19B.
  • Facebook doesn’t break down its revenue by company, but Forbes estimated total revenue to be equal to $5 billion by 2020.
  • In 2018, WhatsApp generated in profits with over 1.5B users from all around the world.

How Does WhatsApp Make Money?

WhatsApp wasn’t always a free app. In the very beginning, it used to cost $1 as a one-time payment in some countries, while offering a free one-year trial in others, followed by a yearly 1-dollar subscription. It had several ups and downs under that model, but it had around 700 million users at the peak, which means that the annual revenue was $700 million per year at the time. However, Facebook reported that WhatsApp made approximately $1.2M on subscriptions in 2014.

With Facebook, Come Major Changes

That monetization model wasn’t neither sustainable nor profitable enough for Facebook though, which is why WhatsApp ended the subscription model soon after being acquired by the giant social media company. In 2016, the subscription era ended, and the infamous messaging app became free to use.

What’s the Catch? How Does WhatsApp Make Money If It’s Free to Use?

How Does WhatsApp Make Money?
What does the future hold for WhatsApp?

In the beginning, WhatsApp had a strict privacy policy. Jan and Brian believed that the app shouldn’t collect data from users. That’s why WhatsApp didn’t have ads all over it. However, Facebook changed the policy after the acquisition, and they started sending user data – such as conversation patterns, behavioral information, and live location – to their servers to serve better ads.

Over 60 billion messages get sent over WhatsApp every day, and the app has access to each user’s full contact list. That’s a lot of personal information for Facebook to use in their consumer targeting process.

Nothing’s Confirmed, Of Course

Mark Zuckerberg, Facebook’s CEO, promised that the company won’t use the data collected from WhatsApp to improve consumer targeting in Facebook ads. Additionally, Facebook doesn’t seem to be rushed into turning WhatsApp to revenues, which explains why the app generates very little income compared to the size of its userbase.