WhatsApp started as an instant messaging app for mobile platforms, now even available on PC. It's one of the highest downloaded apps in Play Store. And it is also an ad-free app. So, without any direct revenue model, how they earn money? We will look for the answers on the following article. Let's go deeper.
The History
WhatsApp was developed and established by Brian Acton and Jan Coum in 2009. Brian and Jan were both ex-Yahoo employees. They left Yahoo in 2007 and applied for a job in Facebook but got rejected. That's a brief story about WhatsApp. Now let us move on to their Revenue Model.
I will explain revenue model in two parts. First, before acquisition by Facebook. Second, after acquisition by Facebook.
WhatsApp Revenue before acquisition by Facebook
When founded in 2009 WhatsApp was an instant hit and the number of downloads went up exponentially in a short period of time. But the founders hadn't servers which could store data of huge amount, generated daily. So they couldn't have continued the app without generating any revenue.
So they set a price of $1 for some countries and for some other countries it was free for the first year but chargeable $1 for renewal from second year onwards. They were generating a good revenue from this. Back then WhatsApp had 40-50 employees. No one was a very big consultant there and neither of them were hugely paid.
WhatsApp Revenue Model after acquisition by Facebook
Facebook acquired WhatsApp in February 2014 for whooping $19 Billion which was the biggest tech deal till date. Fortune of WhatsApp changed after that.
WhatsApp founder Brian Acton had a strong resistance to the concept of Ad in WhatsApp. He believed people used WhatsApp to see messages only and not unsolicited ads. When fb acquired WhatsApp, revenue of the later was just $100 Million and the valuation stood at just $1.5 Billion but fb acquired it for humungous $19 Billion. But the twist was in the condition set WhatsApp before acquisition. And it was, WhatsApp will be always ad-free. That means Facebook cannot put ads on WhatsApp i.e., no direct Revenue.
So, why Facebook paid $19 Billion?
Facebook uses the data from messages in WhatsApp to increase the reach of its Ads. To know it in details one can visit the website of WhatsApp. Let suppose you are a Tech Enthusiast. You share pictures and texts of various smart phones in WhatsApp, on your status though. Facebook analyze these data to to show me Advertisements of smartphones on my Facebook Feed( WhatsApp and Facebook are synchronized by my mobile number). WhatsApp database has over 1 Billion users so it is able to know the interests of 1 Billion users. This is how fb reaches to me directly with the ads of its clients.
The End Notes
WhatsApp is ad-free but it doesn't mean that it doesn't make money. It doesn't make direct revenue but it does make indirect model of Earning for Facebook by improving its Ad-quality. That's all in this article. I hope you liked this. Please Like and Share.
Cheers!
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