How Does Whatsapp Make Money?

In the year 2009, Whatsapp was developed by Jan Koum and Brian Acton, was primarily an application used for updating statuses from where it got its name. In the future, it was updated to its next version 2.0 in which it was converted into a messenger. It provided an alternative to the costly SMS service. It can be downloaded and used on iPhones, Androids as well as desktops.

This IM application which at present is owned by Facebook has over 1 billion users across the globe. But since WhatsApp usage is free, the question that comes to everybody’s mind is the revenue model that WhatsApp follows to make money. The curiosity about it further rises as WhatsApp supercilious expression against the advertisements. Assuredly, there are some schemes in the minds of developers in concern to its model to make money.

Image Courtesy: CoBuildLab

HOW WHATSAPP MAKES MONEY?

Advertisements are not the source of revenue for Whatsapp. The creators did not like advertisements and thus made the platform devoid of ads, laying their primary focus on user experience and interface.

Their motive was the creation of an instant messaging application that allowed users to connect without it being a place for ads of huge companies. But they had to fetch money to carry out expenses. So, they launched another version of the application for which users are charged an annual fee of $1.

INITIAL REVENUE GENERATION STRATEGY

Watsapp generated its initial revenue of $250,000 from its 5 ex-Yahoo! Peers by making them co-founders of this new platform. This was the first round of revenue followed by the second and third rounds, which was provided by the investment of $60 million by Sequoia Capital. And this was the sole source of income generation for the Whatsapp team which comprised 50 members then. The expenditure of smooth functioning of the application was not huge and included only the verification code sending process for verification of user accounts.

Due to its less cost of running the application, the subscription fees of $1 were scraped.

The main aim of the creators of this application was to create the brand which would be a synonym for an application providing an instant messaging platform for which they needed to maximize the network effect.

The aim was to establish a network before minting money and this proved beneficial. After being chased by Facebook’s owner Mark Zuckerberg for 2 years, its procession was finally taken by Facebook in Feb 2014 for the worth of $19billion; furthermore, the people working were shifted to Facebook payrolls. Koum was also shifted and is currently a member of Facebook’s board.

WHATSAPP’S REVENUE MODEL

After being acquired by Facebook in the year 2014, new opportunities were available for the application. This also led to a change in answer to the question of Whatsapp’s money-making strategy as Facebook launched some strategies for its revenue model after its acquisition.

BUSINESS OF WHATSAPP

Facebook had advanced strategies for this newly acquired application. The company further expanded this platform with the launch of the Whatsapp Business application on which the users could build their business accounts and lead them to provide a credible and verified business account. They could attach certain crucial links to their website or Facebook page on their verified business accounts. Furthermore, it has the feature of setting up autoresponders and linking landline numbers and can also merge the Whatsapp for business API with their product.

This application is also free of cost and does not include any subscription fees. This can be used for all businesses. However, Whatsapp for business API provides the source of income for WhatsApp.

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