WhatsApp is a Facebook-owned instant messaging app that provides service to over 1 billion users, but how does it make money? The app was developed by Brian Acton and Jan Koum in 2009. WhatsApp uses data, so you can all others using the app without paying for it. The app can be downloaded on Android, iPhone and other smartphones. The messages sent across WhatsApp are end-to-end encrypted, so only the recipient and the sender can read the messages.
WhatsApp doesn’t earn profit through ads as the founders didn’t like ads and focused on providing a great interface and user experience. Since they also had to pay their bills, they came up with the paid version of the app. Users of the paid version are charged with an annual fee of $1.
Five ex-Yahoo! friends contributed a total of $250,000, which gave them a co-founder status. The app’s second and third wave of funding was made by Sequoia Capital, which contributed $60 million to Whatsapp Inc. The company invested $8 million in 2011 and another $52 million in 2013. This amount became the only source of income for WhatsApp’s 50 staff members.
Running the app didn’t cost a lot. The primary expenditure included sending verification codes to the users. The founders aimed to make WhatsApp synonymous to an instant messaging app, and this required them to take advantage of the network effect. Their effort was successful.
WhatsApp abolished the subscription fee in January 2016 as it was not an ideal long-term strategy to monetizing the app. It also limited their revenue. WhatsApp stated that no third party ads would be introduced. According to the company, they would be testing tools that allow people to use the app to communicate with organizations and businesses that they want to hear from. Users would get a text message about a delayed flight from their airline on WhatsApp or receive messages from their bank about recent transactions through the app. The company’s focus seems to be mainly on earning revenue from selling services and software and on user growth.
Facebook acquired Whatsapp in February 2014 for a total amount of $19 billion, which opened a lot of new opportunities for the app. Facebook has introduced new plans for the app’s revenue model. One of these plans is the launching of Whatsapp Business, an app that allows users to become a verified business on WhatsApp. It can be downloaded for free. Verified businesses can create a business profile and include links to their Facebook page or website and set up Autoresponders. They can also link their landline numbers with the app and include the Whatsapp for Business API in their product offering. Information entered into the app won’t be shared onto any platform managed by Facebook.
How Whatsapp Earns through the Whatsapp for Business API
Whatsapp for Business API is the company’s first revenue making tool. It allows businesses to incorporate WhatsApp for Business APIs in their systems and connect with customers through notifications. This tool also allows businesses to deal with questions asked by their customers. The ability to send messages has been restricted to prevent ad spam. Businesses can send messages to those who have reached out to them first. The WhatsApp for Business API allows them to send event tickets or appointment reminders to their customers as well as automatically send shipping confirmations.
Businesses are charged for slow replies. This is the revenue generation plan that WhatsApp has come up with for the API. Businesses will be able to reply to messages from users for free for 24 hours only. They will have to pay a certain amount for every message they send after 24 hours. The fee varies for different countries. Businesses can use other apps or tools to respond to messages manually. Examples of such apps include MessageBird, Twilio and Zendesk. WhatsApp Business may not be ideal for businesses serving millions of users. They can’t use API on numbers that are associated with WhatsApp. A new number is needed to install the API.
WhatsApp has plans to allow businesses to use the status feature where users can share animated GIFs, text, videos, and photos for 24 hours to promote and advertise their business.