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Business Model Monetization Series: Exploring WhatsApp’s Revenue Generation & Business Intelligence!

  • Posted July 20, 2018

WhatsApp was launched as a Status Update App, developed by Jan Koum and Brian Acton in 2009. Later, WhatsApp has been upgraded into an Instant Messaging application where it became highly popular among public and as a threat to the paid mobile network providers.

This Facebook owned Instant Messaging application now provides services for more than 1 Bullion users around the world. A million dollar question that comes in many minds is that how this application makes money? As usual other applications out there, WhatsApp doesn’t provide any advertising and the founders were somehow strong enough to avoid those adverts and to provide a free and high quality service to users without interrupting them with commercial ads.

WhatsApp has an aggressive stance against to advertisements, as the goal was clear that the application was created for users and not for big companies to place their ads.

‘No one wakes up excited thinking about the ads they saw last night. People love to remember who they chatted. No one runs for adverts. We want to keep you awake’. This is extract from WhatsApp blog on clarification of why WhatsApp doesn’t encourage advertisements on it.

This could have potentially made a huge loss to the application isn’t it? But in fact, both the developers and Facebook have a better MASTER PLAN for monetization.

Initial Monetization & Business Strategy

WhatsApp got its first funding, worth $250K from five former employees of Yahoo. That was the initial point of first monetization for WhatsApp. All those five former employees of Yahoo were granted a ‘co-founders’ title.

The second and third round of funding was carried by Sequoia Capital which invested a total amount of $60 million ($8 million in 2011 and $52 million in 2013) in WhatsApp Inc. Initially, this was the only source of income to cover the cost of fifty employees of WhatsApp. Although there were no much other operational overheads, the firm has to bear the expenditure of sending initial code to the users. That is why an initial $1 subscription fee was introduced.

The ultimate strategy of the founders was to position the brand as an Instant Messaging Application that caught the eyes of Facebook’s CEO Mark Zuckerberg. In 2014, WhatsApp was fully acquired by Facebook for $19B.

The Revenue Model of WhatsApp

The answer to the question how WhatsApp makes money still remains a mystery to many. However, overall game has changed after Facebook acquired WhatsApp. In the current stance, Facebook just keeps WhatsApp as a Business Intelligence Generator to its primary business, which is generating advertising income from Facebook.

As to WhatsApp’s new Terms and Conditions, the users will have to allow the face that Facebook will use it as an Information Generation Factory. This is where Facebook uses Business Intelligence by collecting user specific information from WhatsApp so that such a better understanding of user demographics can be used to betterment the results of targeted advertisements in Facebook.

Facebook’s future plans for WhatsApp

Facebook has better plans for WhatsApp than generating direct revenue through typical business models such as paid membership and advertisements.

The company has launched a WhatsApp Business Application that allows an entrepreneur to become a verified business in WhatsApp. It has features such as direct linking to websites, Facebook pages, and even the facility of displaying land line numbers. We can expect some premium features in future in this current freemium business model.

The Facebook acquired WhatsApp has also introduced a payments option (P2P payments) within the application for Indian users which will further boost its position in the market and will make it a preferred application for sending money (just like Venmo in the USA). This will further benefit WhatsApp business in the company’s biggest market.

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NORO Solutions is an Online Business Solutions Brand. We provide Business Consultancy through a Research and Solutions based approach. We specialize in the areas of Business Modelling, Business Strategy, Marketing Strategy and Business Intelligence. Write us via admin@norosolutions.com to contact with a Business Consultant.

 

 

 

 

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