WhatsApp Revenue Model And The Reasons Behind Facebook’s 19 Billion Dollar Acquisition !

whatsapp revenue model

Facebook’s owned WhatsApp had announced in March that WhatsApp will be completely free for users and will no longer change any subscription fee. The app that gained more than 1 billion users across the globe allows users to message contacts anyone who is using WhatsApp at no cost and is currently available for iPhones, Blackberries, Symbian and the web version.

Facebook purchased WhatsApp in February 2014 for amount which is estimated to $19 billion. After nine months, (i.e. September 2014), WhatsApp had generated revenue of approximately $1.2 million, as per 2014 Facebook Form 10-Q. The big question is how WhatsApp generated such a revenue?

$1 for on installation:

Perhaps, the simple answer. In some countries WhatsApp used to charge $1 to download the app. While in other countries, the subscription was free first year further which the cost was $1 in each subsequent year. During then, WhatsApp used to gain 1 million users per day helping to generate such a revenue.

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Unlike other apps such as WeChat, a China based SMS application where the company sells ads and games, WhatsApp does not sell any ads.

In addition to this, Facebook’s WhatsApp announced that the messaging app will be free for life time and that its user do not have to pay any subscription fees on March 2016.

The big question that arises now is:

  1. How does WhatsApp generate Revenue, particularly in a developing nation like India?
  2. WhatsApp spends a lot of capital in terms of research and hiring engineers to work for it. But how does WhatsApp generate revenue to pay for their employees?

It is seven years now that WhatsApp is providing instant messaging services and within this span of time, the company has also gathered one billion users. After the company was acquired by Facebook, Techie’s working for WhatsApp are now working under Facebook.

Whatsapp revenue model 2

  • One of the possible way is that WhatsApp might approve official accounts and might charge them annually. These official accounts can be airlines, credit card firms, marketing companies, among others.
  • We have witnessed most of FM radio channels (particularly in metro cities) has now started new way of communication, i.e. chatting via WhatsApp. One can now request to play songs, update about traffic, participate in contests and much more. This way, WhatsApp has eased the FM channel listeners to communicate easily with radio jockeys as the process of communication and participation in radio contests was not easier in the past because, the only method to participate in contests was through SMS where the service providers charge heavily per message that was sent.

But there is still a question as to does WhatsApp charge them a certain amount of fee? Which nobody knows about it yet (except the radio company who has such services.)

  • The other possibilities can be that WhatsApp may allow brands to advertise in future. However, they made it clear so far that they will not sell any ads. Instead will help users to communicate with the companies hassle-free like Want a table reservation? Just WhatsApp a restaurant and get the job done.

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  • When it comes to researching, several research firms, government organizations and data analytics are looking for real time data and analysis in various categories. WhatsApp has now eased the field researching which used to happen earlier for gathering information, analysing data and much more
  • WhatsApp might be generating capital by resolving such questions. Real time and accurate data analytics have been kept a watch by several global institutions such as World Bank, United Nations, World Economical Forum. Few other companies collaborate reports like “The Global Competitiveness Report” which ranks a particular area or nations by their Technological use, Internet, population and GDP.

Although it is not clear that WhatsApp is earning any revenue at present, it is keenly observed by many as to what step is it going to take in future in order to earn revenue. Thus, WhatsApp added huge privacy to its app by adding end-to-end encryption, a huge step in protecting privacy of its users which was a challenging part to every tech companies.

With over a billion users today, WhatsApp was founded in 2007 by Brian Acton and Jan Koum. The app serves as an alternative to expensive SMS services. Circulates around 42 billion messages and 1.6 billion photos daily. It also shares 250 million videos, thus making it arguably the most popular chat application.

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How else do you think Facebook can reap the benefits of its famous 19 billion dollar acquisition? Share you thoughts in comments below !