How does WhatsApp generate its Revenue?
After Facebook acquired WhatsApp in 2014, it has been constantly devising ways of generating revenue from the app without changing its operational structure. Although it is a free to use app for individuals as well as businesses, it charges some nominal fees for extending specific services to businesses. API sharing is one such facility for which WhatsApp charges a fee. Application Programming Interface or API helps to connect businesses with other relevant API and perform tasks through data exchange/ sharing. Uber as well as several food delivery apps resort to this facility.
Secondly, WhatsApp charges a nominal fee of 0.00038 EURO (for India) for mass messaging of tickets, event booking, trip booking and so on. If businesses reply to customer queries within 24 hours the service is free but if the time lapse is more than 24 hours the fee is charged for the first 250k messages. Booking.com, Makemytrip, Singapore Airlines were some of the companies that use this WhatsApp facility.
Thirdly, WhatsApp has introduced P2P payment at 3.99% for all transactions through the app. Although the facility offers direct transfers it hasn’t gained much popularity due to its high rates in India. Finally there are plans of introducing ads in WhatsApp status to enhance revenue.
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It all started with a Noble Thought
WhatsApp, the brainchild of Brain Acton and Jan Koum, was started in 2009 as a status update app. The duo after leaving Yahoo where they had worked for nine years were job hunting and were rejected from both Twitter and Facebook- got the idea of creating this app.
During this time Jan Koum used to workout actively at the gym and while at the gym he started noticing that he was getting a lot of missed calls. He wanted to devise a method by which he could inform friends of his status. So he started this app which allowed people to inform others about their status. Like the status would inform “I am at the gym” or “I am at work”, obviously this became popular with the users and the status would often get replies with counter status updates. This generated the concept of messaging and in no time the APP was updated to exchange messages.
Around 2009 there were no such messaging facilities available apart from the Blackberry messaging service BBM which was available only if you owned a Blackberry phone. Moreover messaging and calls were very expensive during this time, so a free app like WhatsApp became popular in a very short period of time through word of mouth. In fact Brain Acton was driven by the motto – No Ad, No Games and No Gimmicks! Needless to say WhatsApp continued to grow and operate across the globe until it became the most popular Application in the world in 2011.
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The Twist in The Tale
WhatsApp grew as an App that offered simple features without any frills and people loved it. It operated with a small team and nominal expenses. However the only cost it sustained was at the time of new user verification.
Although there were many investors who wanted to invest in the company, in truth WhatsApp was never a huge revenue generator. WhatsApp saw phenomenal growth throughout the world, surprisingly it never gained much popularity in their home market in the US. Till date, Europe, Africa and Asia remain WhatsApp’s key market. So the founders decided to create a new business model, they started charging $ 0.99 per year from its users. Even after making the App a paid one, it still remained popular with its users for its superlative performance and ease of use.
The revenue generated helped the company maintain its small staff quite well and also make the app more user friendly by adding features like photo sharing, voice message and so on. In 2011 WhatsApp topped all apps in Google play store becoming the number one app. By this time the founders were getting sell out offers from giants like Google and Facebook but they kept on declining until 2014. In 2014 Facebook’s Mark Zuckerberg bought WhatsApp for a whopping $19 Billion. The deal was sealed with the promise that the founders will be able to run the business on their own terms. However as the years progressed Facebook started introducing many schemes to make WhatsApp a revenue earner which clashed with the founder’s ideals. Finally, Brain Acton and Jan Koum stepped down from WhatsApp as they felt the app no longer reflected their purpose.
What's Next?
Later Brain Acton started the Signal app, an encrypted messaging app under the non-profit Signal Foundation. The App offers free but secured messaging, photo exchanging and video calling services and is slowly making its presence felt in the international App market.
Source : Youtube
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