How does WhatsApp Make Money

About WhatsApp, Funding, Founders & Funders

About WhatsApp Founders : WhatsApp (WhatsApp Inc.), founded in 2010 by Brian Acton and Jan Koum, both ex-employees of Yahoo!

WhatsApp Funding :
Funded by heavy weights like Sequoia Capital (with a meager 250K USD) who made a killing when it got acquired by Facebook for 19 Billion USD (when WhatsApp had less than 100 Million USD in revenues).  Today WhatsApp boasts of more than a Billion Users across the world on all the OS platforms and is a fully owned subsidiary by FaceBook Inc.  Before we move on to How does WhatsApp make Money, lets take a look at what the Business Model of WhatsApp is.

Business Model of WhatsApp

WhatsApp (messenger) is a cross platform messaging app which used to have a subscription model for its users for an annual renewal fee.  Which very few people paid (hahaha), and for the rest it was being auto renewed (for free) at the end of subscription period.   This was called as ARPU (Average Revenue Per User).  Consider this case, 1 Billion Users, Every one paying about 1 USD for renewal would generate about Billion Dollars in Revenue per year. Other revenue lines (proposed or futuristic) include sticker sale to users, in-app advertising, promoted whatsapps, bulk messaging, download fee.

Today the business model of Whatsapp is, well none! It is a part of Facebook which does all the money making and whatsapp is just a business unit which does not generate any money.  Let’s move on to how does whatsapp make money (internally via transfer pricing) for facebook

How does Whatsapp Make Money
First thing to note is, that when we are online (connected to the internet) we generate some tera bytes of tera bytes of data on every moment on a daily basis. This data includes user habits of shopping, keyword research, content interests, reading interests, watching interests etc. When you send messages over whatsapp, the messages first route through servers of whatsapp (where they are stocked and analyzed for various content present in it) and then to the receiver. This server actually is a smart code which analyses the data based on the content used.

This data is then passed on to facebook for effectively putting targetting options in their ads which are priced higher than the general type of boosts (try putting a target based and the moment you try to narrow it down the price per click goes up).   The things we share on WhatsApp reflect our interests, likes, dislikes.

Consider this, Like Twitter has HashTags (#HashTag) which are often used as listening tool as to what people are saying about a trend, or a brand, The WhatsApp search function on your phone acts as a listening tool for them (if they can search it on your phone, they can read and interpret it as well) and thus they know about your behavior as a person and then facebook targets the right set of ads towards you.

Social Networks and Messaging Apps Business Model:

“If You’re Not Paying for the Product or the Service; You’re the Product” and money would be made from you (your data, your interests, your content cravings, your constant love with your display devices etc.).

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