WhatsApp is a leading instant messaging and voice-over-IP (VoIP) platform used by more than two billion people around the globe. It was founded by Jan Koum and Brian Acton in 2009 but was later on acquired by Meta (formerly Facebook). And despite fears that Meta would use it for advertising or find another way to monetize it, WhatsApp remains absolutely free to use and download.
So, how does WhatsApp make money? Read on for the details.
How Does WhatsApp Make Money?
WhatsApp makes money in two ways: WhatsApp Business API and WhatsApp Pay. The first is an API used by brands like Netflix, Booking.com, Uber, and Wish, while the second is an in-chat feature that enables users to make payments via the app.
But WhatsApp didn’t always rely on its Business API and Pay to make money. Back when it was first launched by Brian Acton and Jan Koum, the business model of WhatsApp was subscription-based.
The initial aim of WhatsApp’s creators was for the app to be an alternative to the pricey SMS. WhatsApp cost $1 to download and the subscription was valid for a year. In some countries, it was free to use during the first year, after which users were charged $1 annually.
Thanks to its business model and no-ads policy, WhatsApp acquired around 600 million users by 2014. But then it was sold to Meta (then Facebook) for around $22 billion. Under Meta’s helm, WhatsApp had reached over 700 million users by 2015, which means it was roughly making around $700 million a year in revenue. In 2016, however, Meta decided to change how Whatsapp earns money which paved the way for today’s revenue model.
WhatsApp Business Model
After Meta decided to cancel the $1 subscription to use WhatsApp, the company first focused on completing its end-to-end encryption model so that no one except the persons you’ve shared the messages with, can see the content shared or listen to the calls made. This made the app safer to use compared to similar ones on the market.
By 2020, Meta had already implemented two ways to monetize WhatsApp – Business API and Pay. Here’s how WhatsApp makes money through these two.
WhatsApp Business API
This is a service that lets companies interact with their customers and helps them connect with potential leads. Originally intended for small businesses, the API enables companies get access to a more direct manner of communication with their customers without having to use SMS or other services.
For instance, Netflix uses it to send its subscribers personalized updates and recommendations from the company’s Verified Business Profile on WhatsApp. Another way is through purchasing ads on Facebook and Instagram that enable users to switch to WhatsApp just by clicking on it. It’s a great way to initiate conversations with businesses. According to official data, more than one million people are using the Click-to-WhatsApp ads.
Regarding WhatsApp monetization, the Business API follows a conversation-based pricing which means companies are charged per message sent or for all messages delivered in a 24 hour session.
Pricing is available upon request but research shows that depending on the number of messages sent, it can cost from $0.0058 to $0.0085 per message. The first 1,000 messages each month are free and different rates apply based on whether the message is user-initiated or business-initiated.
WhatsApp Pay
Similar to PayPal, WhatsApp Pay is a feature that enables users to make payments within the app, linked to their contact list. It’s an easy way for people to send or receive money without having to use any other payment platform. Officially launched in 2020, it’s currently the second most important part of the WhatsApp revenue model.
Similar to how Venmo makes money, WhatsApp Pay charges no fees on the person sending the money but charges 3.99% per transaction to the party receiving it. So if you use it to pay a merchant, the business will be charged 3.99% of the amount.
Additionally, users are motivated to use WhatsApp Pay’s cashback rewards. This is an additional boost to the company’s revenue as it allows users to receive a cashback reward of up to $0.40 whenever they pay a merchant via WhatsApp. So the more they pay with it, the higher WhatsApp’s earnings but also users’ rewards.
WhatsApp Revenue
Meta does not offer data on the revenue of its subsidiaries; however, there are estimates that WhatsApp generates around $1 billion in revenue.
Additionally, there are forecasts according to which WhatsApp could be making between $5 billion to $15 billion in the next few years. But this projection depends on whether the company manages to implement effective monetization strategies for the app.