WhatsApp Business Model Case Study
WhatsApp, a brand, has had a crazy trip, and I mean that, as a reality. Launched by two founders who hated advertising and who supported privacy, WhatsApp ended up in the hands of Facebook - a major technology giant with little respect for user security and privacy.
While WhatsApp thrives under Facebook, growing from 450 months of active users at the time of purchase in 2014 to more than two billion users per month at the time of writing, WhatsApp founders have finally left Facebook due to disagreements over WhatsApp's future of monetization , one of them not even holding on to his shares.
In this blog, we will track the progress of WhatsApp - product, how to make money using it early, those it uses now, and those it plans to use in the future. And while we are doing all this, we will be talking about all the major changes in the system, because without all that context, just reading 'How WhatsApp Makes Money' can be a waste of our time and our time.
How WhatsApp Started?
Prior to launching WhatsApp in 2009, both Jan Kaoum and Brian Acton, worked together at Yahoo for nine years, from 1998 to 2007. In the middle of leaving Yahoo and starting WhatsApp, they both even applied for jobs on Facebook but were turned down.WhatsApp was born in January 2009, after developers bought the iPhone and realized that the apps industry is an unused market that is ready to grow. This was back when the Apple App Store was only six months old since it was launched on July 10, 2008.
When the first version of WhatsApp was launched, it wasn't even a messaging app. All users could do was update their status, which other people could not see in their network.
WhatsApp saw an increase in user hijackings after Apple introduced Push notifications in June 2009, which allowed users to be activated when someone on their network updated their status. Users loved this functionality so much that they started using the app to ping each other up, which led to the pivot of turning the app into a fast mobile messaging service.
The messaging feature, now at the core of the service, has been added to WhatsApp version 2.0, after which the number of users has grown to 250,000. In early 2011, WhatsApp was part of the Apple App Store's top 20 apps.
As the app grows, developers begin to get the attention of interested investors. However, the founders did not agree, because they wanted to build a product that had no ads and receiving business revenue could force them to compromise on their prices.
A 2012 post on the WhatsApp blog entitled “Why not sell ads” highlights why the founders disliked ads and were not interested in advertising-based revenue.
“Of all the advertising companies, the majority of their team of engineers spend their day fixing data mining, compiling the best code to collect all personal data, developing servers that capture all the information and ensure it is transcribed and compiled and cut and packaged and exported ... And at the end of the day the result of it all is a slightly different advertising icon on your browser or on your mobile screen.
Remember, if advertising is involved you the user is a product.
At WhatsApp, our engineers spend all their time fixing bugs, adding new features and fixing all the complexities in our work of delivering rich, affordable, reliable messages to all phones in the world. That is our product and that is our favorite. Your data is not even in the picture. We don't care about it. ”
Though unwilling to take money to do business, the founders of WhatsApp received $8 million from Sequoia Capital in April 2011, but only after it was confirmed that they could keep the app free of ads.
By February 2013, WhatsApp had grown to about 200 million active users and Sequoia invested another $ 50 million, valued at $1.5 billion. But if there were no ads and no plan to integrate them in the future, how did WhatsApp make money in its early days?
In its early days, WhatsApp relied on what is popularly known as the freemium business model - the product was free all year round to attract users and charge a small annual subscription fee of $0.99 to continue the work. However, many users have never paid a penny to use WhatsApp because the service was automatically renewed after the end of their free time.
The Facebook Acquisition
In 2014, when Facebook bought WhatsApp for $ 19 Billion, WhatsApp had 450 million active users worldwide. Looking back, the acquisition, like Facebook’s acquisition of Instagram, not only helped Facebook retain control but also gave the company a huge advantage in future operations. However, the immediate winner of this acquisition was not Facebook, but Sequoia Capital, which made $ 3 billion in investment of 58 Million.
In case you are wondering why the founder of WhatsApp went ahead with the agreement, one of the reasons is that Facebook was allowing WhatsApp to operate independently and follow its vision. Here is what the founders wrote on the WhatsApp blog after the discovery,
“Today we are announcing a partnership with Facebook that will allow us to continue this simple task. Doing this will give WhatsApp the ability to grow and expand, while giving me, Brian, and the rest of our team more time to focus on building the fastest, most affordable and personalized communication service possible.
Here's what will change for you, our users: nothing.
WhatsApp will remain independent and operate independently. You can continue to enjoy the service for a small fee. You can continue to use WhatsApp anywhere in the world, any smartphone you use.
And you can still rely on the fact that there are no ads at all to disrupt your communication. There would be no relationship between our two companies if we had to compromise on core values that will always define our company, our vision and our product.
WhatsApp Becomes Free for All Users
2016 was a full year of events on WhatsApp. After making WhatsApp free for its users, WhatsApp started using the last encryption in April 2016, which meant that no one, not even WhatsApp, could read the content of the users' messages.
Facebook's power grab has finally come in the form of a WhatsApp privacy policy update in August 2016, informing users that some of their data will be shared with parent company Facebook.
Explaining why the privacy policy was being reviewed, WhatsApp wrote in a blog post,
“With more connections with Facebook, we will be able to do things like tracking basic metrics about how often people use our resources and better fight spam on WhatsApp. And by connecting your phone number with Facebook programs, Facebook can give you suggestions for better friends and show you the most relevant ads if you have an account on them. For example, you may see an ad from a company you already work with, rather than one from someone you have never heard of. You can learn more, including how to control your data usage.
As WhatsApp has operated independently for two years after the acquisition of Facebook and no ad program is displayed on WhatsApp, the privacy review movement was about Facebook trying to gain more and less about WhatsApp's ability to track user metrics and combat. spam.
The only silver line in this episode is that WhatsApp has confirmed that end-to-end encryption is still available, and neither WhatsApp nor Facebook will be able to see users' messages.
The Founders of WhatsApp leave
When Facebook acquired WhatsApp in 2014, the founders were not only promised to be able to work independently, Zukurberg even assured the founders that they would not be under pressure to make money in the next five years. However, the pressure to make money came earlier than promised, which led to disagreements over how to monetize WhatsApp.While Facebook wants to use ads on WhatsApp, an app that has been opposed to ads, Brian has proposed a switch to the metered user model, in which users will be charged after the use of a certain number of messages.Brian's proposal was rejected by Facebook, which led to his resignation in Sep 2017, without even waiting to receive his shares, he lost $ 850 million in the scheme. Jan Koum, following the example, left in April 2018, after waiting for his purchase time.
So how does WhatsApp currently make money?
WhatsApp currently makes money from two sources: WhatsApp Business and WhatsApp Pay. WhatsApp also generates indirect revenue from 'Click on WhatsApp ads' which redirects users from Facebook to WhatsApp.Let’s take a look at both of each WhatsApp’s revenue sources to better understand them.
WhatsApp For Business
The WhatsApp Business app helps businesses to serve customers on WhatsApp, with offers to create product catalogs and provide customer support. While the Business App is free to use, WhatsApp monetizes the service with the WhatsApp Business API. Just one month after the launch of the WhatsApp Business API, major technology companies such as Netflix, Uber & Wish and 100 others had begun testing the service.
WhatsApp makes money by charging registered businesses to respond less. Businesses are allowed to respond to user messages free of charge for up to 24 hours but are charged per message for delays, which vary from country to country.
The cost of late WhatsApp responses not only encourages companies to prioritize providing support for WhatsApp but also ensures that customers opt for WhatsApp while communicating with businesses as they can expect faster responses. When businesses and customers become accustomed to using WhatsApp as their means of communication, WhatsApp may charge extra messages, or reduce the free window.
In an October 2020 update on their blog, WhatsApp also revealed business billing plans for what they call 'Business Marketing' but your details remain vague on the basis of publicly available information.
WhatsApp Pay
In recent years, WhatsApp has shown a tendency for strategies to monetize a business application, and WhatsApp Pay is another similar guarantee. While WhatsApp Pay is a free end user service, businesses are required to pay a minimum of 3.99% per transaction. At the time of writing, WhatsApp Pay is only available in India and Brazil.
WhatsApp Plans How To Make Money In The Future
Going forward, WhatsApp plans to continue monetizing the app by introducing ads in the status section and by releasing WhatsApp Payment abroad.
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