{"id":5153,"date":"2019-03-18T22:51:46","date_gmt":"2019-03-18T22:51:46","guid":{"rendered":"https:\/\/gtechbooster.com\/?p=5153"},"modified":"2022-11-30T22:01:22","modified_gmt":"2022-11-30T22:01:22","slug":"how-facebooks-whatsapp-makes-money","status":"publish","type":"post","link":"https:\/\/gtechbooster.com\/how-facebooks-whatsapp-makes-money\/","title":{"rendered":"How Facebook’s WhatsApp Makes Money"},"content":{"rendered":"\n

WhatsApp was founded in 2009 by Brian Acton and Jan Koum as an\nalternative to pricey SMS services. The app allows users to upload their\n contact book and message anyone who has the app installed, at no cost.\nIt is available for iPhones, Androids, Blackberries, Windows Phones,\nNokia phones and, most recently, desktops.<\/p>\n\n\n\n

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Facebook Inc. (FB)\npurchased WhatsApp in February 2014 for $19 billion and according to the\n 2014 Facebook Form 10-Q, in the nine months preceding September 30,\n2014, WhatsApp generated revenue of $1,289,000. On Monday, April 30,\nWhatsApp co-founder and Facebook Inc. director Jan Koum announced his\ndeparture from Facebook. Media reports indicate that Koum decided to\nleave after a disagreement with Facebook over its use of user data and\nits desire to allow advertisements on WhatsApp. Koum, along with his cofounder Brian Acton, has long been an advocate for the privacy of WhatsApp users. <\/p>\n\n\n\n

In\n February 2018, WhatsApp had 1.5 billion users and was Facebook\u2019s\nsecond-biggest property, after its namesake app. It\nhas surpassed Facebook\u2019s messenger and Instagram, the third and fourth\nbiggest properties. So how is WhatsApp making its money?<\/p>\n\n\n\n

One Dollar at a Time and Beyond<\/h3>\n\n\n\n

The\n short answer used to be $1 at a time. In some countries, the app used\nto cost about $1 to download; in others, the first year is free, but\neach subsequent year costs $1 \u2013 in other words, WhatsApp had a\nsubscription model. At the peak under this model it has about 700\nmillion users worldwide; yearly revenue can be estimated at $700 million\n per year at this time.<\/p>\n\n\n\n

In January 2016, Facebook revealed in a\n10-Q filing that because WhatsApp was monetized in \u201ca very limited\nfashion,\u201d it may not be generating meaningful revenue in the long term,\nhinting that the strategy would change. Shortly after WhatsApp announced\n in a blog post that the era of subscriptions had come to an end, and\nthe messaging app would now be free to use. <\/p>\n\n\n\n

There are still no\nads in the app, however. \u201cStarting this year, we will test tools that\nallow you to use WhatsApp to communicate with businesses and\norganizations that you want to hear from,\u201d the company wrote at the\ntime. The goal is to have people communicate directly with i.e. their\nbanks, airlines etc. over the app, while the businesses picks up the\nbill previously paid through subscriptions. <\/p>\n\n\n\n

Though\nWhatsApp\u2019s financial statements aren\u2019t public (Facebook doesn\u2019t break\ndown its revenue by company), Forbes estimated total revenue to be $5\nbillion and the average revenue per user to be $4 by 2020. As\nof February 2018, WhatsApp had over 1.5 billion users and sees 60\nbillion messages sent per day, according to Facebook CEO Mark Zuckerberg\n in a Q4 2017 conference call. <\/p>

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Other SMS Apps<\/h3>\n\n\n\n

Outside\n of America, where sending text messages is more expensive, SMS apps are\n popular and have successfully monetized. WeChat \u2013 the popular Chinese\nSMS app has ads as well as online games. The company is partly\nresponsible for Tencent\u2019s, which owns WeChat, $6 billion revenue in the\nthird quarter of 2016. The app has over 846 million active users.<\/p>\n\n\n\n

Focusing on Growth<\/h3>\n\n\n\n

WhatsApp is adding around a million users per day, mostly in Latin America, India and Europe. With SMS apps, growth is exponential \u2013 when one person in a social group downloads and advocates using the app, many new users download the app in order to communicate with the original person. These new users then encourage other members of their other social groups to use the app.<\/p>\n\n\n\n

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By increasing market penetration, the app becomes indispensable and the user base grows. <\/figcaption><\/figure><\/div>\n\n\n\n

Is it Really About the Money Though?<\/h3>\n\n\n\n

Industry\n insiders have speculated that part of the rationale behind acquiring\nWhatsApp was for Facebook to access user\u2019s behavioral data and personal\ninformation.<\/p>\n\n\n\n

With location sharing data, 60 billion messages sent\nper day and access to users\u2019 entire contact lists, Facebook has access\nto a ton of personal information \u2013 all uploaded and saved on\nits servers. While Mark Zuckerberg has previously promised that this\ndata won\u2019t be used to improve consumer targeting in Facebook ads, it\nwill be unless the user changes the settings to not share information\nwith Facebook.<\/p>\n\n\n\n

End-to-End Encryption Controversy<\/h3>\n\n\n\n

WhatsApp,\n as well as other messaging providers (including Apple), have been in\nhot water with governments around the world after it was determined that\n terrorists used apps to communicate before and during attacks.\nGovernments and counter terrorism agencies wanted the companies behind\nthese apps to share the encryption key in order to gain access to\nmessages sent and received by the terrorists. The companies, however,\nrefused to oblige. This led to WhatsApp\u2019s adoption of end-to-end\nencryption, which prevents anyone, including WhatsApp, except the sender\n and receiver from gaining access to the data shared on the app.<\/p>\n\n\n\n

The Bottom Line<\/h3>\n\n\n\n

Whether\n you believe that Facebook overpaid for WhatsApp or not, the fact is\nthat the app has a growing revenue stream with more room to grow. <\/p>\n\n\n\n

More Information<\/h2>\n\n\n\n