How do free apps like whatsapp make money

How WhatsApp Makes Money For Meta Platforms: 2 Key Ways

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Updated: Nov. 11, 2022By: Kimberlee Leonard

Table of Сontents

WhatsApp Basics
WhatsApp Business Model
2 Ways WhatsApp Makes Money
Bottom Line

WhatsApp is a free messenger service that is used by over 2 billion people around the world. Because it’s free for consumers, it begs the question, how does WhatsApp make money? The Meta Platforms subsidiary makes money through WhatsApp for Business and WhatsApp Pay.

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WhatsApp Basics

WhatsApp was founded in 2009 by Brian Acton and Jan Koum. It’s a free secured messenger service that allows domestic and international communication among users on a secured network. It’s currently headquartered in Menlo Park, California with Meta Platforms, Inc. (META) as the parent company. Facebook changed their corporate name to Meta Platforms in 2021.

Facebook acquired WhatsApp in 2014, making it the largest subsidiary of the company next to Instagram and Facebook Messenger. WhatsApp does not trade independently.

Tip: As a subsidiary of Meta Platforms, investors would buy META to gain exposure to the business of WhatsApp.

As a messenger service, WhatsApp is robust. Users can send text messages, voice messages, make both voice and video calls, share images and documents, and share one’s location. Essentially, anything a user needs to communicate with another is available via WhatsApp.

Users like the platform because it is free with no ads and offers end-to-end encryption, with the company stating that it is not able to read or capture messages.

WhatsApp Business Model

The product of WhatsApp is simple: a robust personal messaging service. How it makes money is a little different than many others in the arena. WhatsApp started as a 'freemium' service, where users were able to send messages for free for the first year and then renew at an annual $0. 99 fee. They have shifted from this business model and stayed away from in-app advertising. Instead, they make money through WhatsApp for Business and WhatsApp Pay.

There are a number of competitors in the market, all who have different business models for revenue generation. Some of the top competitors are LINE, Kakao, Kik, and Skype.

LINE makes money from in-game purchases and other services such as stickers.
Kakao generates revenues from advertising.
Kik gives users rewards for watching advertisements.
Skype is a subscription service for worldwide calling.

Note: Both Acton and Koum have left WhatsApp after disagreements with Facebook over the way the app would be monetized.

2 Ways WhatsApp Makes Money

1. WhatsApp for Businesses

While the service is free for consumers to use, businesses can sign up for WhatsApp for Business to use the platform for sales and support. The WhatsApp Business API is used by major brands such as Netflix, Uber, and Wish. It originally encouraged businesses to use the platform and provide quick responses. WhatsApp would charge businesses for delayed responses. So while the business could respond for free within 24 hours, it would be charged a fee for responses later than that.

The new business API for WhatsApp for Business applies charges based on a messaging tier. The charges are:

First 250,000 messages: $0.0085 per message
Next 750,000 messages: $0.0083 per message
Next 2 million messages: $0.0080 per message
Next 3 million messages: $0.0073 per message
Next 4 million messages: $0.0065 per message
Above 10 million messages: $0.0058 per message

Essentially, the more messages a company sends, the cheaper the rate is.

2. WhatsApp Pay

WhatsApp Pay is a payment feature similar to PayPal. Users can send money to friends, family, and businesses for free. The party receiving the money is charged 3.99% per transaction.

Like other money sending services, this app connects to a linked bank account where the funds are taken from or deposited. This service is currently only available in India and Brazil on specific devices.

Tip: Look for WhatsApp to expand WhatsApp Pay in the near future.

You can’t invest in WhatsApp on its own but you can understand how the messenger giant makes money for its parent company, Facebook. WhatsApp is becoming a larger revenue source as it competes to maintain its market share on secure messenger services.

This article was written by

Kimberlee Leonard

244 Followers

Kimberlee brings professional experience to her writing. She started as a FINRA Series 7 broker and later transitioned her career into owning an insurance agency and preparing taxes.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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How Does WhatsApp Make Money?

WhatsApp was founded in 2009 by Brian Acton and Jan Koum as an alternative to pricey SMS services. The app allows users to upload their contact book and message anyone who has the app installed, at no cost. It is available for iPhones, Androids, and desktops. If it's free-to-use, how does WhatsApp make money?

Meta (META), formerly Facebook, purchased WhatsApp in February 2014 for $19 billion and according to the 2014 Facebook Form 10-Q, during the nine months preceding Sept 30, 2014, WhatsApp generated revenue of $1.29 million.

In 2018, WhatsApp co-founder and Facebook Inc. director Jan Koum announced his departure from Facebook. Media reports indicate that Koum decided to leave after a disagreement with the company over its use of user data and its desire to allow advertisements on WhatsApp. Koum, along with his co-founder Brian Acton, has long been an advocate for the privacy of WhatsApp users.

In March 2022, WhatsApp had more than two billion users in 180 countries and was Meta Platforms, Inc.'s (formerly Facebook) second-biggest property, after its namesake app. It surpassed Instagram Facebook Messenger, the third- and fourth-biggest properties. Read on to see how WhatsApp makes money.

Key Takeaways

WhatsApp is a mobile app that allows users to message and call each other over the Internet.
WhatsApp was founded in 2009 and bought by Meta (formerly Facebook) in 2014 for $19 billion.
Meta's second biggest property is now WhatsApp, after its Instagram and Facebook Messenger service.
The way WhatsApp used to make money was through a subscription model. It cost $1 to download and then $1 a year going forward.
Meta eventually removed the $1 fee and made WhatsApp a free service, with the idea that consumers would communicate with businesses through it and businesses would pick up the cost.
Revenue in 2021 for WhatsApp was $8.7 billion.

One Dollar at a Time and Beyond

The short answer used to be $1 at a time. In some countries, the app used to cost about $1 to download; in others, the first year is free, but each subsequent year costs $1; in other words, WhatsApp had a subscription model. At the peak under this model, it had about 700 million users worldwide; yearly revenue could thus be estimated at $700 million per year at that time.

In January 2016, Facebook revealed in a 10-Q filing that because WhatsApp was monetized in "a very limited fashion," it may not be generating meaningful revenue in the long term, hinting that the strategy would change. Shortly after, WhatsApp announced in a blog post that the era of subscriptions had come to an end and the messaging app would now be free to use.

There are still no ads in the app, however. "Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from," the company wrote at the time. The goal is to have people communicate directly with their banks, airlines, etc. over the app, while the businesses pick up the bill previously paid through subscriptions.

Though WhatsApp's financial statements aren't public (Meta doesn't break down its revenue by company), Forbes estimated potential revenue to be $27–$29 billion by Q1 of 2022. As of March 2022, WhatsApp had over two billion users.

WhatsApp Business, the business platform of the messaging app, provides a host of tools for businesses to access company insights and measure metrics, making it an attractive tool for businesses.

Focusing on Growth

WhatsApp is globally popular—the top three countries are: India with 390 million users, 108 million in Brazil, and 75 million in the United States. 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 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.

Information from Statista

Is It Really About the Money Though?

Industry insiders have speculated that part of the rationale behind acquiring WhatsApp was for Meta to access user’s behavioral data and personal information.

With location sharing data, 100 billion messages sent per day, and access to users' entire contact lists, Meta 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 Meta ads, it will be unless the user changes the settings to not share information with Meta.

End-to-End Encryption Controversy

WhatsApp, as well as other messaging providers (including Apple), have been in hot water with governments around the world after it was determined that terrorists used apps to communicate before and during attacks.

Governments and counter-terrorism agencies wanted the companies behind these apps to share the encryption key to gain access to messages sent and received by the terrorists. The companies, however, refused to oblige. This led to WhatsApp's adoption of end-to-end encryption, which prevents anyone, including WhatsApp, except the sender and receiver from gaining access to the data shared on the app.

How Many Users Does WhatsApp Have?

According to industry estimates, WhatsApp has more than 2 billion users worldwide as of 2022.

Is WhatsApp Really Secure and Private?

Yes, WhatsApp messages, including text, images, and other media, are secured through end-to-end encryption. This means that they cannot be intercepted or read during transmission.

Does WhatsApp Make Money?

Yes, WhatsApp generated more than $8.7 billion in revenue in 2021 for its parent company, Meta (formerly Facebook).

The Bottom Line

WhatsApp has become one of the most popular messaging services in the world with only room to grow. Whether you believe that Meta overpaid for WhatsApp or not, the fact is that the app has a growing revenue stream with endless possibilities that will allow it to bring in more revenues over time.

HOW DOES WHATSAPP MAKE MONEY? Income model

WhatsApp is a messaging application that allows users to communicate with each other through text, audio or video.
WhatsApp makes money by charging fees for its Business API offering and transaction fees for WhatsApp Pay.
Here we take a look at how WhatsApp makes money in the competitive world of instant messaging.

What is WhatsApp and how does it work?

WhatsApp is a messaging software that allows users to interact through text, audio and video.
WhatsApp is available through apps for tablets and smartphones (available on Android and iOS devices) and a web app (called WhatsApp Web).
Users can communicate with each other individually (in private chats) or in groups of up to 512 people.

The WhatsApp platform is fully encrypted, which means chat users can only read messages.
Users can send emoticons, GIFs, voice messages, images, videos, and even documents in addition to text messages. They can also reply to text messages.
Users who want to share their unique moments can do so using the WhatsApp Stories feature. These moments are then made available to anyone who has kept a contact within 24 hours.
In addition to its consumer app, WhatsApp provides a commercial communications solution (called WhatsApp Business). Companies can:

Create business profiles that contain useful information for your customers (such as address, email addresses, or a link to their website).
Contact tagging to improve categorization
Automatic messages and quick replies
Broadcast (similar to newsletter) (similar to newsletter)

WhatsApp Business is designed for small businesses. If a company is larger, it can use the WhatsApp Business API, which provides an API endpoint that allows it to be integrated with current business software.

WhatsApp is used by over 2 billion people in over 180 countries. Thus, it is the largest communication platform on the planet.

Does Facebook profit from WhatsApp?

Because they control the WhatsApp brand, any money generated from the messaging program goes directly to Facebook and its shareholders.
Facebook bought Whatsapp in 2014 for a staggering $19 billion. It goes without saying that with such a significant investment, Facebook will want to monetize the platform as much as possible.

Facebook was already the market leader in "free" platforms, and the inclusion of Whatsapp further solidified its position.
Facebook has experience buying and promoting successful brands; it acquired Instagram in 2012 and has seen its user base skyrocket.

How does WhatsApp make money without ads?

WhatsApp now has various sources of income that bring money to the corporation.
This revenue generation prevents in-app ads and ensures that millions of users have free access to the platform.
Here are the top three sources of WhatsApp revenue:

WhatsApp Business API
WhatsApp Payments
Go to WhatsApp Advertising
To better understand them, let's take a closer look at WhatsApp's existing revenue streams.

#1.

WhatsApp Business

WhatsApp Business allows businesses to serve their customers on WhatsApp by creating product catalogs and providing customer service. While the business app is free to use, WhatsApp monetizes the service through the WhatsApp Business API. A month after the launch of the WhatsApp Business API, well-known Internet companies such as Netflix, Uber, Wish and 100 others began testing the service.

WhatsApp made money in the early days of the WhatsApp Business API by charging registered businesses for late responses. Businesses can reply to user messages for free within 24 hours, but will be charged per message for a delayed reply, which varies by country.

The new WhatsApp for Business API allows organizations to have the first 1,000 chats for free, but after that they have to pay a certain amount for communication, which varies by country.

No. 2. WhatsApp Pay

In recent years, WhatsApp has shown a strategic trend towards service monetization through business, and WhatsApp Pay is another example of this. While WhatsApp Pay is a free service for end users, businesses must pay a flat fee of 3.99% per transaction. At the time of publication, WhatsApp Pay was only available in India and Brazil.

#3. Click to WhatsApp Indirect Ad Revenue

In addition to WhatsApp For Business and WhatsApp Pay, WhatsApp also makes money through Click to WhatsApp ads, which are not ads seen on Facebook or WhatsApp but redirect people from Facebook to WhatsApp.
Since these ads do not appear on the WhatsApp app, it would be wrong to attribute their revenues solely to WhatsApp; instead, it's one of the ways Facebook is using WhatsApp to generate revenue.

What is the price of WhatsApp Business API?

WhatsApp Business is a powerful and sophisticated subscription product.
The Business API is an important source of revenue for WhatsApp, and the quality of the service only improves over time as more companies participate in it.

There are a few API related fees that any business owner should consider before investing. Here is a brief overview of the most important ones:

#1. Monthly fee:

To access the API, you must work with one of the official WhatsApp providers.
There are several different providers and their prices vary greatly. Some companies charge £75 per month for the service, while others charge around £500.

No. 2. Customize fee:

Depending on the provider you have chosen for your Business API, you may be charged an additional installation fee. This is usually determined by the number of numbers you want to add to the network.
It's important to note that just because a service doesn't charge an installation fee doesn't guarantee it will be the cheapest in the long run.

#3. Call charges

Previously, WhatsApp charged business users based on the number of messages they sent to colleagues. This fee is now determined per conversation.
This is a positive adjustment as it discourages users from cramming too much information into one WhatsApp message.

Whatsapp makes a profit?

While most of its users are free, WhatsApp makes money.
Most of these revenues are generated by the premium models developed by WhatsApp for business. However, WhatsApp owner Facebook believes that the messaging network has much more to offer than direct monetization.

WhatsApp is just another social network added to the Facebook portfolio.
By operating multiple websites and apps, Facebook can attract and change customers among them, increasing long-term revenue.

With features such as end-to-end encryption and always-on servers, WhatsApp is likely to dominate the instant messaging software market for years to come.

How many people use WhatsApp?

According to industry forecasts, WhatsApp will have over 2022 billion users worldwide by 2022.

Is WhatsApp really safe and private?

Yes, WhatsApp messages, including text, photos and other content, are fully encrypted. This means that they cannot be intercepted or read during transmission.

Whatsapp makes a profit?

Yes, WhatsApp's parent company, Meta, made over $8.7 billion in sales in 2021 (formerly Facebook).

How has WhatsApp made money in the past?

Before the free model rolled out, WhatsApp made money from a paid subscription. WhatsApp paid consumers £0.69 a year to use the service.
This may not seem like much, but since WhatsApp had 250 million users before switching to a free model, it is clear that they were taking a significant risk in making this transition.
Excitement, of course, paid off, and it became clear that the free model with additional paid services is the most profitable for the platform.
Although WhatsApp is free, the popular WhatsApp scam tries to convince people to pay or provide banking information.

How is Whatsapp going to make money in the future?

It is not clear if WhatsApp intends to integrate more monetization into its platform in the future.
We know that the platform will continue to support its Business API tool and expand the payment mechanism to new locations.
In particular, the payment mechanism may become a significant source of income for the organization in the future.

Making payments directly from an instant messaging network has many applications and is undoubtedly a service that people immediately welcome.
It has also been reported that WhatsApp will start displaying ads in the app status area.

This would be a direct source of income and the corporation is probably under pressure to realize it.
WhatsApp's economic model is very unusual, and investors will probably want to see more proven and reliable monetization tactics implemented in the service.

How much money does WhatsApp make?

At the time of the previous calculation, WhatsApp should have had $5 billion in annual revenue.
This came after the platform dropped its $0.99 per year price in favor of the current free scheme.

However, given that most users don't pay for the service, it's clear that WhatsApp For Business and Pay do it admirably.
With this level of success, it is unlikely that WhatsApp will ever return to a subscription model for regular users.
And it's not just direct income from WhatsApp. If Facebook can get people to use WhatsApp, it can get people to use their other services as well.

WhatsApp Funding and Value

WhatsApp Inc. attracted the attention of venture capitalists and technology investors immediately after its debut.
Sequoia Capital invested $8 million in the platform in 2011 and was one of the site's early sponsors. In 2013, Sequoia invested an additional $52 million.
Sequoia's investment paid off when Facebook acquired WhatsApp in 2014. Of course, since WhatsApp was under the umbrella of a large Internet corporation, WhatsApp has had little problem with funding.

Creating a proper score for WhatsApp is a challenge, especially given how closely it ties into other metaservices.
With that said, if WhatsApp went public today, it would likely cost significantly more than 19billion dollars paid out by Facebook, which at the time was a staggeringly huge deal.