WhatsApp Business Model – How does WhatsApp make money?

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The WhatsApp business model can be considered a multisided platform that connects users that want to message each other for free securely, independently of its cellphone operating system. Whatsapp has recently added businesses as its customers.

Let’s find out why! Today, the most used instant messaging application worldwide, without any competition threat even visible in its rearview mirror. In January 2024, the app already had more than 2.78 billion users, spread over over 180 countries, and available in 60 languages.

However, the most curious issue about the WhatsApp business model lies precisely in the fact that it is a free service and, even more surprisingly, without any ads! But then, the question remains: how does WhatsApp make money?

A brief history of WhatsApp

whatsapp business model

WhatsApp was born in 2009 — yes, it has more than a decade of existence — from the minds of two former employees of Yahoo Company, Jan Koum, and Brian Acton. The initial idea was to be a status update application, so the pun with the expression “What’s up?”. But its version 2.0 has established itself as an instant messaging app and has not changed since. It ended up replacing SMS, but through an internet connection. Its massive growth in the first four years attracted many eyes to the company.

WhatsApp’s development was financed by an investment of $250,000 from five former Yahoo friends. However, further ahead, there were two other rounds of investment, this time from the Sequoia Capital fund, with a total amount of $60 million. Initially, the WhatsApp business model was paid, and it worked through an annual subscription, which was paid at the time of installing the app.

In 2013, the annual fee dropped to one dollar, being the first year of use completely free. At the beginning of the following year, in February 2014, WhatsApp was acquired by Facebook, for about 19 billion dollars. Its founders joined the board of the organization, led by Mark Zuckerberg. However, shortly afterward, both left the company, due to disagreements with Facebook‘s owner.

WhatsApp’s acquisition by Facebook (now Meta) marked a significant turning point for the company. With Facebook’s resources and expansive user base, WhatsApp was poised for even greater growth and innovation. Under the leadership of Facebook, WhatsApp introduced several new features and expanded its reach to a global audience.

One of the notable additions to WhatsApp was the introduction of voice calling in 2015. This feature allowed users to make free voice calls to their contacts, further solidifying WhatsApp as a comprehensive communication platform. The voice-calling feature was widely embraced by users and contributed to the app’s continued popularity.

Another significant milestone in WhatsApp’s history was the introduction of end-to-end encryption in 2016. This security feature ensured that all messages and calls exchanged through the app were protected from unauthorized access, providing users with a greater sense of privacy and security. The implementation of end-to-end encryption earned WhatsApp praise and recognition for its commitment to user privacy.

In recent years, WhatsApp has continued to evolve and introduce new features to enhance the user experience. One of the notable additions was the launch of WhatsApp Business in 2018, a separate app designed specifically for small businesses to interact with their customers. This allowed businesses to create profiles, send automated messages, and provide customer support through the platform. WhatsApp Business has gained traction among businesses worldwide and has become an essential tool for customer engagement and communication.

Despite its immense success, WhatsApp has faced challenges along the way. In 2021, the app faced backlash and a significant user backlash after announcing changes to its privacy policy. Concerns about data sharing between WhatsApp and Facebook led to a widespread migration of users to alternative messaging platforms. However, WhatsApp responded to the backlash by clarifying its policies and reinforcing its commitment to user privacy.

In January 2016, WhatsApp’s initial subscription model came to an end, leaving it with no apparent revenue stream.But we know that no business can be sustained solely by the admiration of users. So, let’s take a look at the WhatsApp business model canvas.

Who Own WhatsApp

As mentioned, in February 2014, Facebook Inc. (now Meta) acquired WhatsApp for the amount of $19 billion. The messaging app’s founders, Brian Acton and Jan Koum, were both incorporated into Facebook’s board. However, years later, both of them left. While Acton left in September 2017, Koum left a few months later, in April 2018. In October 2021, Mark Zuckerberg’s company was relabeled to Meta Incorporated, which makes Meta the current owner of WhatsApp, with Will Cathcart holding its CEO position since 2019.

WhatsApp’s Mission Statement

WhatsApp’s mission statement is to “let people communicate anywhere in the world without barriers.”

How WhatsApp makes money

WhatsApp’s Business

Yes, when we talked about the business value propositions, an explanation of where WhatsApp’s revenue would come from has already begun to be drawn. The functionality here begins by creating business profiles that will become “verified” companies in the app.

Whatsapp Business Model - Ecosystem

This verification allows linking company profiles between WhatsApp and Facebook, with some functional buttons, in addition to configuring automatic responses, linking landline numbers, and integrating WhatsApp Business API. And that is where the revenue streams lie.

WhatsApp Business API allows companies to integrate their systems to contact customers through notifications and messaging. The platform allows sending of messages, appointment reminders, invitations and other interesting means of communication to organizations to be automatically scheduled.

Whatsapp Business Model Customer Service

However, WhatsApp charges for slow responses. What does that mean? The messages sent to customers within the first 24 hours of contact are free of charge. However, all messages sent after this period will be charged. And the fees vary from country to country.

And if you are thinking that this business model is doomed to fail because it is enough for companies to respond within the initial 24 hours, think of the volume of customers that airlines and banks need to respond to every day.

Or even about a promotion that the company wants to launch later… It is worth remembering that this business model doesn’t violate the initial rule against ads, because companies cannot contact customers first, just respond to original contacts. That is, the user will be using WhatsApp to communicate with companies and organizations that they want to hear from and not the other way around.

WhatsApp’s Payment Service

WhatsApp introduced a peer-to-peer (P2P) payment feature, available in India and Brazil, in May 2022, enabling users to send money directly to friends and family from the app’s contact card menu. The P2P payments feature is free for individual users, fostering seamless and secure money transfers within the app.

However, WhatsApp monetizes this service by charging a transaction fee for businesses. When businesses utilize the P2P payments feature to receive payments from customers, a commission of 3.99% per transaction is imposed. This helps businesses leverage the convenience and popularity of WhatsApp as a payment platform while contributing to the revenue generation for WhatsApp.

Ads directing to WhatsApp Chat

WhatsApp’s revenue model also encompasses generating revenue through ads created within the WhatsApp Business app. Businesses can create customized Facebook and Instagram ads that lead users to start a conversation on WhatsApp. This feature allows businesses to engage with their target audience directly through the chat interface.

Using the WhatsApp Business app, businesses can select photos for their ads, set budgets and durations, and target specific audiences based on demographics and interests. If businesses have a Facebook account or page linked to their WhatsApp Business account, they can create ads that appear on both Facebook and Instagram.

Even if businesses do not have a Facebook account or page, they can create ads using their email address, which will then be displayed on Facebook and Instagram. These ads provide opportunities for businesses to promote their products or services and drive engagement with customers directly through the WhatsApp chat platform.

WhatsApp’s Future Revenue Streams Strategies

But Mark Zuckerberg and company, of course, are not interested in stopping there and are still looking for ways to capitalize on their billions of users. There are also plans that companies can use the status feature (shared for 24 hours) to promote their business. This, again, doesn’t injure the app’s policy because no user is “obliged” to look at the status, let alone record the contact details of companies on their smartphone. Once again, it’s about showing the customer “just what they want to see”.

How Does The Whatsapp Business Model Work

Finally, it is worth remembering that when we talk about information security, there is always that doubt: is data not the greatest asset of WhatsApp? Anyway, thinking about it is just speculation. Mark Z. guarantees that this data will never be used in favor of targeting customers for Facebook ads. Trust is now in the hands of each of the 2 billion users.

Nonetheless, in January 2021, WhatsApp updated its privacy policy, which sparked concerns and controversy around data sharing and potential implications for user privacy.

The updated policy highlighted that certain user data, such as phone numbers, profile names, and transaction information, may be shared with Facebook and its affiliated companies. This move raised concerns about the potential misuse of user data for targeted advertising purposes.

The controversy led to a significant backlash, with many users and privacy advocates expressing a loss of trust in WhatsApp’s commitment to privacy. WhatsApp responded by clarifying that the policy changes primarily targeted business chats and that end-to-end encrypted messages between individual users remained unaffected.

WhatsApp’s Business Model Canvas

The WhatsApp Business Model can be explained in the following business model canvas:

Whatsapp Business Model Canvas

WhatsApp’s Customer Segments

Any smartphone user is a potential WhatsApp customer. From children to adults, for personal or professional contact, and with particular value for those who need to communicate at long distance, at low — or no cost.

WhatsApp’s Value Propositions

  • Convenience: The user can communicate with anyone else in the world who has access to a smartphone with the internet, through an absolutely simple interface and instant contact;
  • Cost: Users can keep in touch via text and voice messages or internet calls, and even share files at no cost;
  • Security: All messages sent via WhatsApp are encrypted. This prevents the leakage of information exchanged privately;
  • Features: Over the years, WhatsApp has been including new features that make sense to its audience, such as an in-built camera, group chat for up to 1024 people, sharing status, and sending files up to 2 GB;
  • Business: There is an application for companies, by which businesses can be promoted through advertisements. Companies can even create catalogs for release (now the business model is starting to make a little more sense, isn’t it?).

WhatsApp’s Channels

The mobile app itself is the main channel. Besides it, there would be Google Play Store, Apple’s App Store, and social media, to a lesser extent.

WhatsApp’s Customer Relationships

The customer relationship of WhatsApp includes its zero-ad and free-from-charge policy, customer support, end-to-end encryption, and very user-friendly service.

WhatsApp’s Revenue Streams

  • Free (no ads)
  • Business API usage fees
  • Ads directing to WhatsApp Chat

WhatsApp’s Key Resources

Certainly, the most important key resource is the infrastructure of the app itself, especially its server and the platform. In addition, its human resources team, with engineers, programmers, developers, designers, marketers, etc. Plus, of course, the WhatsApp brand laid its foundations on the concept of zero advertising.

WhatsApp’s Key Activities

The key activities of the app aim to ensure the best possible experience for the user. Therefore, they involve software research and development, customer support, and maintenance of data security and information privacy.

WhatsApp’s Key Partners

The great partners for developing WhatsApp were, without a doubt, Sequoia Capital and Facebook. In addition to these, its key partners include mobile companies, internet providers, OS integrators, app stores, and more.

WhatsApp’s Cost Structure

  • Platform development and maintenance
  • People

WhatsApp’s Competitors

  • Telegram Messenger: Probably the most famous alternative to WhatsApp, it allows groups of up to 100,000 people, to share files of up to 1.5 GB, self-destructing messages, and other things. Available in Android, iOS, Windows Phone, Windows, macOS, Linux, and Web;
  • Signal Private Messenger: The messaging app of Signal Foundation, the organization that provides the end-to-end encryption technology WhatsApp and Facebook Messenger use. It has more security options, such as self-destructing messages and screen security (prevents screenshots), and it encrypts everything, from backups to shared files. Also, it does not link any data to your identity. Available in Android and iOS;
  • Discord: Besides messaging, on Discord, you can make voice and video calls and even share your screen. It has some great integrations from Spotify, YouTube, Reddit, Twitter, Facebook, GitHub, etc. Group chats are up to 10 people, but you can create a server if you need more. Available in Android, iOS, Windows, macOS, Linux, and Web;
  • Bridgefy: This offline option does not need a mobile network or internet connection — you can communicate through a Bluetooth connection or a Wi-Fi direct base. You can also use users as nodes to send messages at long distances. Available in Android and iOS;
  • Kik: It does not use your number for operation. You sign up using your email ID, and Kik creates a username for you. It also supports bots, so you can play quizzes, get the latest news, and others. Available in Android and iOS;
  • Snapchat: More than a messaging app, Snapchat is also a social media app. But if offers self-destructing messages, it notifies when somebody takes a screenshot, allows group chats, voice calls, group voice calls, and it is very innovative, being often copied by its pairs. Available in Android and iOS;
  • Skype: One of the best for those who make a lot of video and voice calls, when it comes to quality of connection, especially in group video calls. With the power of Microsoft behind it, Skype is one of the best business chat apps on the market. Available in Android, iOS, macOS, Windows, and Web.

WhatsApp’s SWOT Analysis

Below, there is a detailed swot analysis of Whatsapp:

whatsapp swot analysis - whatsapp business model

WhatsApp’s Strengths

  • Customer base: Any social media business depends heavily on the number of users, and WhatsApp has over 2 billion users;
  • Technology: WhatsApp is based on a strong technology, which offers high-quality connectivity and is rarely down. There have not been reports of major bugs or failures;
  • Price: The app is completely free for users;
  • Brand: It is the top-of-mind brand regarding messaging apps;
  • Availability: WhatsApp is available for all the platforms iOS, Windows, and Android, making it reachable for everyone;
  • Ad-free: Being an ad-free platform increases customer satisfaction.

WhatsApp’s Weaknesses

  • Data privacy: The company has not been able to provide real proof of data privacy for the users;
  • Online: People who live in areas where the internet is not available cannot reach the application.

WhatsApp’s Opportunities

  • Internet penetration: As the internet is still increasing, especially in developing economies, it can soon reach a bigger number of users;
  • Technological development: As WhatsApp is one of the earliest entrants in the market, it can take advantage of providing innovations for its great user base before the competition;
  • Penetration of smartphones: Just like the internet, the adoption of smartphones keeps increasing, all over the world.

WhatsApp’s Threats

  • Innovations: You never know what technology can appear next, so there is always a possibility of new ideas threatening WhatsApp;
  • Regulations: Nowadays, the app is permitted and used all around the globe, but new regulations may prevent its full functionality as it does currently, thus losing market share;
  • Entry barriers: Basically, anyone can build a product like WhatsApp, which makes it pretty simple for new entrants to take share.

Conclusion

The WhatsApp business model can be tricky and complex to understand, as it is a completely free software, available for everyone to use. Nevertheless, it is interesting to understand the necessity created by the tool, not just for people, but also for companies, to communicate via the app. WhatsApp’s API allows thousands of commerce platforms to operate and coordinate their business.



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