WhatsApp was founded in 2009 by Brian Acton and Jan Koum as an alternative to pricey SMS services. Facebook Inc. (FB) purchased WhatsApp in February 2014 for $19 billion. Facebook paid $4 billion in cash, $12 billion in Facebook shares, and an additional $3 billion in restricted stock units granted to WhatsApp’s founders Koum and Acton. Facebook will not pay this huge amount unless there is any profit for them. However, it is difficult to understand WhatsApp’s business model which generates revenue for Facebook.
WhatsApp is adding around a million users per day and its growth rate is exponential because when one person in a social group downloads and advocates using the app, many new users download the app in order to communicate with the original person. These new users then encourage other members of their other social groups to use the app.
Number of daily active WhatsApp Status users from 1st quarter 2017 to 1st quarter 2019 (in millions) as per statista
How WhatsApp Is Making Money For Facebook?
Let’s get to the points. Following are the different ways which I think WhatsApp is generating revenue for FaceBook and could make more money in the future looking at its exponential growth.
1. They Are Selling Our Personal Data
We cannot deny that the WhatsApp has access to our location, entire contact list and all our uploads are saved onto their server. Industry insiders have speculated that part of the rationale behind acquiring WhatsApp was for Facebook to access user’s behavioral data and personal information. Nothing is free in this world, Facebook runs ads on its platform to make money and it uses our personal information to show relevant advertising.
According to our speculation, All the conversations on Whatsapp are backed up on Whatsapp servers constantly. Our conversations reflect our interests, likes, dislikes and majorly depicts our preferences. This information is invaluable to big firms where relevant tailor-made products can be offered after data sorting. Most of the services which are ‘free’ make using their product and make money out of it.
However, WhatsApp claims that it is using end-to-end encryption, which prevents anyone, including WhatsApp, except the sender and receiver from gaining access to the data shared on the app. I will it up to you to whether to trust on this or not. Following news clears some doubt on Facebook’s intention with Whatsapp.
On April 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 Facebook over its use of user data and its desire to allow advertisements on WhatsApp.
While Mark Zuckerberg has previously promised that this data won’t be used to improve consumer targeting in Facebook ads, it will be unless the user changes the settings to not share information with Facebook. Most of us really don’t care about these settings when we download or use the app Facebook tracks all your moves, behavior, likes, dislike and many more and knows you better than your spouse. Shocking, isn’t it?
2. WhatsApp Payment
WhatsApp is coming up with WhatsApp Payments which is a peer-to-peer money transfer feature that is currently only available in India. WhatsApp has received permission from the National Payments Corporation of India (NPCI) to enter into a partnership with multiple banks in July 2017 to allow users to make in-app payments and money transfers using the Unified Payments Interface (UPI).
UPI enables account-to-account transfers from a mobile app without having any details of the beneficiary’s bank.
Having such a huge userbase, WhatsApp payment surely going to rule its competitors for sure so as the money showering.
3. WhatsApp Cryptocurrency
WhatsApp is not leaving any stone untouched and trying to enter into the cryptocurrency business. On February 28, 2019, The New York Times reported that Facebook was developing an in-house cryptocurrency that would be incorporated into WhatsApp.
The project reportedly involves over 50 engineers under the direction of former PayPal president David Marcus. This “Facebook coin” will reportedly be a stable coin pegged to the value of a basket of different foreign currencies.
4. WhatsApp Business APIs
WhatsApp is also providing business APIs for small business owners. They might not be charging the users but they are charging business accounts. They cut is very small to maintain communication with the potential customers but looking at the future, the profit definitely is good.
5. Subscription Option In Future
WhatsApp had tried going paid app (One Dollar at a Time – $1 a year) but sooner they decided to keep it free. But who knows what’s coming next. There is no other app which can stand against WhatsApp at this moment. WhatsApp may charge in subscription basis and make good money. it has 1.5 billion-plus users. Simple math will show that it could make over a billion per year for Facebook if it ever goes paid.
Each business has its own business model and he WhatsApp & Facebook has its own. Some people care about the personal data being stolen and some really don’t care. In reality, we are free to choose an alternative and better option.
I hope you liked the read, please share your feedback in the comment section and let me know what you feel about WhatsApp and FaceBook’s business tactics. Don’t forget to Subscribe for timely updates on the fresh articles and share this article with your friends.