The story of WhatsApp began when Jan Koum and Brian Acton founded the company in February 2009. They developed it initially as a status update application, but later introduced Whatsapp 2.0 which changed its function to Instant Messaging Application (IMA).
Whatsapp has been on a path of explosive growth ever since it was acquired by Facebook in 2014. As the world’s most popular IM app, Whatsapp now provides service to more than 1 billion users all over the world and its developers have big plans for an innovative revenue model.
How does WhatsApp Make Money?
WhatsApp provides an ad-free platform that emphasizes the user experience and interface. They don’t monetize through advertisements unlike most other platforms but instead rely solely on users purchasing a subscription to their service every year.
The founders of WhatsApp wanted to create an instant messaging platform where users and not big companies place ads. But, they had to pay their bills too. So they came up with a paid version of the application that charged $1 each year from its users.
Initial Revenue Generation Strategy
WhatsApp first got funding of $250,000 from five ex-Yahoo! friends who were given cofounder status. They received a second round of investment totaling $60 million ($8 million in 2011 and then another 52 million in 2013) from the venture capital firm Sequoia Capital. Without any other income for their 50 employees running WhatsApp was expensive; they paid to send verification codes to users as well as offer service globally on multiple devices with different operating systems.
WhatsApp’s founders employed the tactic of ‘building a network first and money later.’ They committed to avoiding monetizing their messaging app for two years, allowing them to acquire 450 million users. Once they had created this large user base, Facebook’s CEO Mark Zuckerberg offered $19 billion dollars in an acquisition deal that WhatsApp accepted.
WhatsApp’s Revenue Model (Facebook’s Strategy)
After the acquisition in 2014, Facebook announced that they will be charging businesses to use WhatsApp’s platform for marketing purposes. This was a very strategic move where users would not feel overwhelmed with ads on their personal messages but instead redirect them towards business pages which can help improve the user experience even more!
These businesses can create their own business profile, add links to their website or Facebook page, set up autoresponders for instant messaging with customers directly on WhatsApp. Also, they are able to integrate these features into an already existing product line via the API.
WhatsApp for Business is a free app available to help businesses communicate with their customers. While this application is easily accessible, companies must pay licensing fees if they want access to the WhatsApp API program in order to fully utilize all features of this messaging service.
WhatsApp for Business API
WhatsApp, a leading messaging platform with 1.5 billion users worldwide has officially made its foray into the B2B market by launching an API that will let businesses integrate WhatsApp for Business on their systems and automate communication to customers through push notifications and handle customer queries automatically.
The company extended its business functionality by launching its first revenue-earning product – Whatsapp Business API. Now if you don’t know what an API is or how it works I’d suggest reading our article on “what is API economy” first so you can understand what’s happening here better…WhatsApp API lets companies integrate WhatsApp for business in their own system allowing them to reach out directly to customers through notifications dealing with any issues.
In order to prevent ad spam, the company restricted its messaging capabilities. Businesses can only send messages to people who have contacted them first; however, their API will also help businesses programmatically send shipping confirmations and event tickets directly from within a website or app. The company is already working successfully with clients like Booking.com and Wish.
Now, how does WhatsApp make money through API?
Well, it charges businesses for slow replies. This means that the business can respond to messages from users for free up to 24 hours but will have to pay a fee after this period of time. The charge is fixed depending on your location in different countries.
Businesses can reply to customer inquiries through automated tools like Zendesk, MessageBird, or Twilio. However, this solution does not work well for businesses dealing with millions of users (airline tickets, travel tickets, movie ticket bookings, etc.). Moreover, the business cannot use WhatsApp API on any number already associated with WhatsApp; they need a fresh number each time to install it.
WhatsApp is introducing a P2P payment option to Indian users, which will bolster their position in the market and turn them into Venmo-like senders of money. This development bodes well for WhatsApp’s business as they continue to hold strong in this key market.
Facebook recently held an F8 conference where Mark Zuckerberg announced that the WhatsApp payments feature would be rolled out to more users. This will open up opportunities for new businesses on Facebook, taking advantage of their network effect.
Future Revenue Earning Strategies
WhatsApp, the messaging platform that recently decided to go public and was bought over by Facebook for $19 billion in 2014 is copying Snapchat’s strategy yet again. The company now plans on using WhatsApp Status – a feature where text, photos/videos are shared with friends or groups of people who follow each other to advertise businesses.
The Bottom Line
Despite the fact that WhatsApp has only room to grow, Facebook paid a hefty price for it. However, this may not be surprising given how popular and revenue-generating it can become in future times.