Saturday, October 13, 2012

How does WhatsApp make money?

WhatsApp has destroyed the SMS based incomes of a number of telecom companies. It is one of the most successful instant messaging platforms linking millions around the globe. Started in June 2009, by two employees of Yahoo Brian Acton, and Jan Koum, the objective of the company was to provide a means for Apple's iPhone and RIM's Blackberry devices to communicate with one another. Soon it became available on other platforms such as Android, Java J2ME, Symbian etc.

Today WhatsApp delivers on an average 1 Billion messages each day. Users can share texts, locations, and media such as photos, videos and audio. What more can an instant messaging service provide!

It is doing to the instant messaging world what Skype did to telephony all around the world. Bringing the world together and doing it in a way that makes it cheap, effective, reliable and very cool.

Now all this got me thinking, how does WhatsApp make money, without advertisements, and since it is a freely downloadable application? I mean, what are the things that WhatsApp needs to run operations at such a scale (a study shows they crossed the 10 billion messages mark in 2010 and it stores user messaging history, data storage costs money and lots of it)? And the last question, how do they market themselves?

To find the answers I dug a little deeper.

And this is what I found.

1. WhatsApp employs only 20 engineers who work on the development of the application. The rest are involved in customer support. The exact number is unknown, but my guess would be around 20-50 people.

2. WhatsApp prides itself on working with extremely limited budgets, and hence, is extremely efficient. Brian Acton once himself said that in order to keep the venture profitable, it needed to operate with extremely tight budgets.

3. WhatsApp's website is worth $10 only! Which means they do not spend here, tight budgets? Yes, we get it.

4. WhatsApp is the #1 downloaded application on several application store platforms, such as Google Play, Apple iTunes, etc. And it does not spend a penny on advertising, again saving costs. They rely on word of mouth publicity, which is why probably in the European markets, where telecom companies used to make a killing by charging exorbitant rates on messaging services, (TSPs telecom service providers) ignored the presence of WhatsApp initially where downloads were in thousands, but surged to millions in a matter of one year making life difficult for TSPs who had to lay off people!

5. They recently got funding from investment companies to the tune of a cool $8million!

6. The cost of downloading WhatsApp on iTunes is only 99 cents, and on other platforms is available for free. But there is a catch, WhatsApp is free only for the first year. Second year onwards there is a fee for $1.99 for a period of 3 years, and this is where they are going to make money, no not make money, MINT money. Consider this, currently WhatsApp has over 100 million subscribers, and suppose 80 million are non-iOS users, they will earn a cool $160 million easily! What a genius marketing strategy!

7. They rely on their funding from donations, much like Wikipedia. Which keeps the company afloat despite high running costs.

Now the other set of questions which is what this blog is about. The future.

1. What will happen if some TSP buys out WhatsApp in the future?
2. What happens when there is a better Instant Messaging platform which comes to the market? Will it mean the death of WhatsApp?
3. Is advertisement free applications the way to the future?

Here are the answers I came up with, and I am open to discussions.

1. If WhatsApp is bought by a TSP, then, we will witness the DEATH of free instant messaging as we know it now. Not a pleasant possibility, but considering the way WhatsApp is operating now, we can be rest assured that like Wikipedia, WhatsApp will survive. For a long long time.

2. What happens when there is a better Instant Messaging solution available? Well, WhatsApp will die, unless it re-invents itself, but that again looks to be a distant possibility. I again refer to Wikipedia, which is still going strong, and there is no way, there can be another Wikipedia in the near future. So I feel WhatsApp is safe.

3. Advertisement free applications available for free Instant Messaging IS the way to the future. I mean, who wants to see an application being bombarded with advertisements, which in more cases than none, irritate users by slowing down the application, hogging bandwidths of data plans! So yes, advertisement free applications are here to stay, and if someone else comes up with a platform as unique as WhatsApp can and should emulate WhatsApp's strategies, for success is guaranteed!

I am a faithful WhatsApp user and I certainly do hope this trend continues!

31 comments:

  1. A better network will hit the market. This time, something better

    ReplyDelete
  2. I recently switched from my old Blackberry with free WhatsApp to a new contract with a SamsungS4. Imagine my outrage when trying to load WhatsApp now I am told I will be charge R6 A DAY!!!!! Whether I use it or not!!!!!!! This translates into ZAR to over R2000 per year! FREE (or 99 cents)????? I dont think so! WHAT a scam now that I will either have to pay up or lose my database of WhatsApp contacts!

    ReplyDelete
    Replies
    1. This comment has been removed by the author.

      Delete
  3. thats weird, your company is scaming you

    ReplyDelete
  4. I have always wanted to know. This is indeed a great article and well researched. In my country Malawi, a lot of people are on whatsApp and we keep wondering how they make money with no advertising

    ReplyDelete
  5. Wechat is better with more options like video chat... the point is when we activate the watsapp on a new mobile and we get a message of an activation code who earns that money and if watsapp is 1.9dollars people may switch to wechat . Many have switched to viber as it has option of group chat

    ReplyDelete
  6. Now matter how many alternative are there like WeChat, Viber but still WhatsApp is my favorite one.

    ReplyDelete
    Replies
    1. Have you tried BBM!? Completely free, secure and reliable, nd the way they plan on making money off it is through BBM channels, much like twitter, so you're never forced to look at anything you don't want to, but like me i'm already subscribed to loads of commercial channels, just because I have a personal interest in those companies.

      Delete
  7. Great article, I love it. I would like to see more competition. Please tell me guys, do you like an application like mxit where you get an AD before you login?

    ReplyDelete
  8. Great article. That's how Whatsapp makes money and no matter how many new chat messengers are launched, still Whatsapp rules and will stay the best for the coming years!

    ReplyDelete
    Replies
    1. You need to see how this kid is able to make
      over $2000 a month selling pictures he took
      with his camera!

      http://adfoc.us/37141461146959

      He lays out exactly how you can do it too!
      This page might not be up for much longer
      so you need to check it out right now.

      http://adfoc.us/37141461146959

      Delete
  9. But i have a doubt, i have been using Whatsapp for more than 2 years. But until i have received no message alerts saying that the trial period is gonna end! Like me i have come across many people. So how come Whatsapp earn income???....

    ReplyDelete
  10. Hello, great write-up, I seriously value ones thought process along with having that described correctly, thank you with regard to discussing this kind of good write-up. whatsapp for pc

    ReplyDelete
  11. There are other apps that are linked to Whatsapp too, for example 2lines for whatsapp where you can have multiple whatsapp accounts on the same phone, surely they make money of these 'secondary apps'.

    ReplyDelete
  12. Your article is good however it still does NOT answer the questions about how do they make money. One thing not accurate in your article is the 2 year thing. I have been using whatsapp for over 4 years now and have not been asked for a dime. Oh may be not 4 because I changed my phone number a couple of years ago but still both my old phone and my current one have been using whatsapp for over 2 years each.

    One of the theories out there is the 99c charged for apple devices. Per your estimate of 20 million Apple users - that is a cool $20 million. Now the issue is that the 99c is a one time fee not an annual. I guess we will have to wait and see but as of now lets enjoy whatsapp free of ads.

    ReplyDelete
  13. I have been using whats app for more than one year and they dont charge me a penny till date.

    ReplyDelete
  14. Just been bought by Facebook for 16 billion dollars! What will happen now?

    ReplyDelete
  15. I have been using whats app for free for more than 2 years now... I have not been asked for any money....

    ReplyDelete
  16. I've been using Whatsapp for nearly 3 years now and have never paid a cent for the app.

    Its loads better than WeChat and BBM and other nonsense. As a developer the superiority in performance and quality is noticable. When sharing images, the full image also shows with the same quality, unlike BBM that distorts it. Also, the size limit for sharing items is FAR higher than BBM. The emoticons in WeChat are irritating because it automatically sends when you select one, rather than giving you the option of changing what you selected before sending, in case you selected the wrong one.

    ReplyDelete
  17. I believe that their source of income can mirror that of Google's: Data mining. WhatsApp handles hundreds of millions of messages and stores all of them. That is a LOT of data that can be indexed. Imagine a sporting goods company who wants a list of people who are interested in archery. A quick search of the message data and they produce a list of thousands of email addresses of people who have discussed the topic. Now sell the list.

    ReplyDelete
  18. FB pays 19B... thats THE answer

    ReplyDelete
  19. A friend whats app me , saying whats app director has sold d company to Mark Zuckerberg for $10 billion. Is this information a hoax, as the massage the icon will change to a new icon????? ...... Chris

    ReplyDelete
  20. This post is trully important and we can also spy whatsapp users. we can easily track our children. we are satisfy with your mentioned point “whatsapp spying is really important.

    ReplyDelete
  21. Now a day's Whatsapp Marketing is growing very fast and you have shared such a nice post on Whatsapp Marketing. Thanks for
    sharing such a nice post.

    ReplyDelete