How does WhatsApp Make Money – Unicornomy Analysis
About WhatsApp, Funding, Founders & Funders
About WhatsApp Founders : WhatsApp (WhatsApp Inc.), founded in 2010 by Brian Acton and Jan Koum, both ex-employees of Yahoo!
WhatsApp Funding : Funded by heavy weights like Sequoia Capital (with a meager 250K USD) who made a killing when it got acquired by FaceBook for 19 Billion USD (when WhatsApp had less than 100 Million USD in revenues). Today WhatsApp boasts of more than a Billion Users across the world on all the OS platforms and is a fully onwed subsidiary by FaceBook Inc. Before we move on to How does WhatsApp make Money, lets take a look at what the Business Model of WhatsApp is.
You Should Definitely Read this: How does FaceBook Make Money
Business Model of WhatsApp
WhatsApp (messenger) is a cross platform messaging app which used to have a subscription model for its users for an annual renewal fee. Which very few people paid (hahaha), and for the rest it was being auto renewed (for free) at the end of subscription period. This was called as ARPU (Average Revenue Per User). Consider this case, 1 Billion Users, Every one paying about 1 USD for renewal would generate about Billion Dollars in Revenue per year. Other revenue lines (proposed or futuristic) include sticker sale to users, in-app advertising, promoted whatsapps, bulk messaging, download fee.
Today the business model of whatsapp is, well none! It is a part of facebook which does all the money making and whatsapp is just a business unit which does not generate any money. Let’s move on to how does whatsapp make money (internally via transfer pricing) for facebook.
How does WhatsApp Make Money
First thing to note is, that when we are online (connected to the internet) we generate some tera bytes of tera bytes of data on every moment on a daily basis. This data includes user habits of shopping, keyword research, content interests, reading interests, watching interests etc. When you send messages over whatsapp, the messages first route through servers of whatsapp (where they are stocked and analyzed for various content present in it) and then to the receiver. This server actually is a smart code which analyses the data based on the content used.
This data is then passed on to facebook for effectively putting targetting options in their ads which are priced higher than the general type of boosts (try putting a target based and the moment you try to narrow it down the price per click goes up). The things we share on WhatsApp reflect our interests, likes, dislikes.
Consider this, Like Twitter has HashTags (#HashTag) which are often used as listening tool as to what people are saying about a trend, or a brand, The WhatsApp search function on your phone acts as a listening tool for them (if they can search it on your phone, they can read and interpret it as well) and thus they know about your behavior as a person and then facebook targets the right set of ads towards you.
Social Networks and Messaging Apps Business Model:
“If You’re Not Paying for the Product or the Service; You’re the Product” and money would be made from you (your data, your interests, your content cravings, your constant love with your display devices etc.).
Another Messaging App Business Model Here : How does SnapChat Make Money
How WhatsApp Makes Money
WhatsApp has one Mantra;
To Rule the devices of every one wanting to connect with every body else in their phonebook.
And how do they plan on doing it?
Introducing everything needed by you to interact, co-oridnate with each other by adding more and more comm lines between devices. As of this article date, WhatsApp has the following Connection Nodes between users:
- Chat – Messaging
- MultiMedia Sharing – Messaging
- Calls – VoIP, Tele Phonic Conversations (Eating into Viber and other similar Apps)
- Video Calls – VoIP, (Eating Skype Revenue)
- File Sharing – Trying to Eat GMAIL (But untill they figure out large file sharing mechanism in minimum possible time, they are at bay)
- Group Chats (Unconnected people) : Like Webinars will be added soon.
- Emotions – Smileys
How can WhatsApp Make Money
- Open up its Developer API for every one to use into their own app / website for chatting with live users (like Zopim Chat for wordpress)
- Integrate with Important Message sending services (All Notifications, Updates to be done via WhatsApp rather than standard messaging)
- Corporate Clients: Let employees chat over whatsapp web rather than the old fashioned IBM chat or go to meeting (ofcourse whatsapp web with limited sharing and content capabilities) – Slack is Ruling this Space btw Read about the Business Model of Slack here.
Recently there was an update to WhatsApp’s Terms and Conditions stating they may sell the data to FaceBook which was heavily criticized. Only Twitter Makes Money selling data so far and that too via a SaaS platform by appointing Resellers.
Well this is it about How does WhatsApp make money :-), Drop in your views in comments if you have any question or other startup to be evaluated.
Disclaimer: The understanding of the How does WhatsApp Make Money is of the Author’s himself, neither any investor, banker or VC (local or global) or qualified consultants or the company have confirmed or explained the same to the author and the descriptions, stats, facts and figures, if used, are either obtained through secondary web research or interrogation of relevant search professionals or other resources on the web. Please use your own discretion to use this info when required and by continuing to read, you agree to indemnify the author & Unicornomy from the entire liability arising out of using this info on your own