The WhatsApp Business Model – How Does WhatsApp Make Money?

Executive Summary:

  • WhatsApp is a communication platform that allows users to message each other – either via text, audio, or video.
  • WhatsApp makes money via fees from its Business API product as well as by imposing a transaction fee on WhatsApp Pay.
  • Founded in 2009, WhatsApp has grown to become the world’s largest communication platform.
  • It is used by over 2 billion people in over 180 countries across the globe.
  • Additionally, more than 100 billion messages are exchanged on its platform every day.

The History Of WhatsApp

WhatsApp is a messaging app that was launched in 2009 by two former Yahoo employees, Brian Acton and Jan Koum. The app allows users to send text messages, voice messages, and make voice and video calls to other users using the internet, without the need for SMS or phone calls. It quickly became popular, particularly in international markets, due to its low cost and ease of use. In 2014, Facebook acquired WhatsApp for $19 billion, which is one of the largest acquisitions in the tech industry. Since then, WhatsApp has continued to grow in popularity and now has over 2 billion monthly active users worldwide.

What Is WhatsApp & How Does It Work?

WhatsApp is a messaging application that allows users to communicate with each other via text, audio, and video. The app can be accessed via its tablet and smartphone apps (available on Android and iOS devices) as well as its web application (called WhatsApp Web). Users can communicate with each other individually (in private chats) or via groups of up to 512 members. WhatsApp's platform is end-to-end encrypted, ensuring only users in a chat can read messages.  Users can also exchange emojis, GIFs, audio, pictures, videos and documents, as well as react to text messages. WhatsApp also offers a communication tool for small businesses, WhatsApp Business, which allows them to set up business profiles, label contacts, and send automated messages and quick replies. The WhatsApp Business tool is geared towards small businesses. If a business has some greater scale, it can opt into using WhatsApp’s Business API. The API endpoint allows them to integrate it into their existing business software. WhatsApp is used by more than 2 billion people in over 180 countries, making it the world’s largest communication platform.

How Does WhatsApp Make Money?

WhatsApp makes money by charging companies for access to its Business API and transaction fees from payments. Previously, the company used a subscription model where users paid $1 per year to use the app. However, in 2016, Facebook decided to ditch the subscription model and focus on user growth and monetization through working with businesses. The company also doesn't plan to insert ads into the product.

Business API: 

In 2018, WhatsApp launched its Business API as a way to monetize the app. Businesses are charged on a per-message basis, but the first 24 hours of a conversation are free. The cost per message varies based on total message volume and country. The first 1,000 conversations each month are also free. The 24-hour limit encourages businesses to improve and speed up their reply time, which increases customer satisfaction and likelihood of continued use of WhatsApp. The company also partners with other companies such as Twilio to deliver its API, and is working on expanding its functionality.

Payment Fees: 

WhatsApp has been working on a payment product since 2018, starting with a launch in Brazil, but it was suspended by the central bank. However, it later enabled P2P payments in India and lifted the ban in Brazil. Sending payments to friends and family is free, but businesses are charged a 3.99% transaction fee. Currently, 100 million users in India are able to use the product and are incentivized to do so with cashback rewards of $0.40. The National Payments Corporation of India (NPCI) limits the number of users WhatsApp can onboard, but it is expected to increase over time.

WhatsApp Funding, Valuation & Revenue: 

According to Crunchbase, WhatsApp raised a total of $60.3 million in venture capital funding, with Sequoia Capital as its only investor. In 2014, Facebook acquired the company for $19 billion for a 100% stake. Facebook does not disclose any revenue generated specifically from WhatsApp, it is included in the overall income figures.