WhatsApp was fouded in 2009 by Brian Acton and Jan Koum as an alternative to pricey SMS services. For free, the apps allowed the user to upload their contact book in your android or iPhone and message anyone who has the app installed. This app is available for iPhones, Androids, Blackberries, Windows Phones, Nokia (NOK) phones and most recently is desktop.
In February 2014, Facebook Inc. had purchased WhatsApp for $19 billion and according to Facebook Form 10-Q 2014, WhatsApp has generated revenue of $1,289,000 in the nine months preceding 30 September, 2014. How WhatsApp is actually making its money?
One Dollar at a Time & Beyond
The quick answer used to be $1 at a time but in some countries, to download the app is cost $1 meaning that the first year is cost free but for every continuous year will be cost $1. In other words, WhatsApp has a subscription model. The revenue per year was estimated at $700 million as the model reached its peak about 700 million users worldwide.
In January, 2016 Facebook revealed that WhatsApp was monetized in very ‘limited fashion’ , it may be not generated meaningful revenue in a long period of time that hint change of strategy. Soon after WhatsApp announced in a blog spot that the subscriptions had come to end, the messaging app will be free to be use.
For the time being, there are still no ads in the app but “Starting this year, they will test the tools that allow user to use WhatsApp to communicate with business and organization” state the company at the time. The goal is to have people communicate directly with banks, airlines and others while the business picks up the bill previously paid through subscriptions.
Forbes estimated the total revenue to be $5 billions and the average revenue per user is to be $4 by 2020. WhatsApp had 1.2 billion user by April 2017.
Other SMS / Messaging App
Outside from the America, the sending text messages are more pricey, SMS apps are popular and have successfully monetized. As example, WeChat, the popular Chinese SMS app has ads and few online games. The company is responsible for Tencent’s that owns WeChat, had $6 billio revenue in the 3rd quater of 2016. Now, the app has over 846 million active users.
WhatsApp is adding around a million users per day, mostly in Latin America, India and Europe. With SMS apps, growth is exponential – 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.
By increasing market penetration, the app becomes indispensable and the user base grows.
Is it All About Money?
Industry insiders have speculated that part of the rationale behind acquiring WhatsApp was for Facebook to access user’s behavioral data and personal information.
With location sharing data, 42 billion messages sent per day, and access to users’ entire contact lists, Facebook has access to a ton of personal information – all uploaded and saved on its servers. While Mark Zuckerberg has previously promised that this data won’t be used to improve consumer targeting in Facebook ads, it will be unless the user changes the settings to not share information with Facebook.
End To End Encryption Controversy
WhatsApp including other messaging providers and also Apples, have been in hot situation with governments around the world after terrorist had used the apps to communicate with the others before, during or after attacks. Because of that, the governments and counter terrorism agencies had ask all those companies to share their encryption key in order to gain access to messages sent and received by the terrorists. However, the companies refused to obliged which lead to WhatsApp’s implementation of end to end encryption that prevents anybody including WhatsApp itself except the sender and receiver from gaining access to the data shared in app.
Whether you believe that Facebook overpaid for WhatsApp or not, the fact is that the app has a growing revenue stream with more room to grow.
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