- What is WhatsApp, and how does it work?
- How does WhatsApp make money?
- WhatsApp Business & API
- Click to WhatsApp ads
- Plans on monetizing WhatsApp with in-app ads on hold
- WhatsApp’s profit and revenue
- WhatsApp’s funding and valuation
- What is the WhatsApp business and revenue model?
So you use WhatsApp and wonder “How does WhatsApp make money?” Here is a full, in-depth, breakdown of their two (2) revenue streams and the different products and services they offer, as well as the WhatsApp business model, their year-over-year revenue, and how WhatsApp works.
What is WhatsApp, and how does it work?
WhatsApp is a multi messaging and voice calling app, available for iPhones, Androids, and desktops, that allows you to connect with anyone in the world for free without the SMS international charges usually tacked on by cell phone carriers.
Developed and founded in 2009 by Brian Acton and Jan Koum, WhatsApp went on to grow to 465 million monthly active users (MAU) before being acquired by Facebook in February 2014 for roughly $19.3 billion USD.
As of February 2020, WhatsApp has over 2 billion users worldwide making it the #1 most popular messaging app in the world. (as shown in the chart below)
How does WhatsApp make money?
But how does WhatsApp make money off of those 2 billion users if WhatsApp is free to use? By charging their business users.
Below is a breakdown of how WhatsApp monetizes their 2 billion users and the 50 million businesses who use their app – including price breakdowns and how much money it makes them.
Here are the 2 ways of how WhatsApp makes money (in 2021):
WhatsApp has a revenue model that makes money in two (2) ways.
#1. WhatsApp Business & API
On January 18, 2018, Facebook launched WhatsApp Business which allows businesses to personally connect with their customers through WhatsApp messages.
The way it works is, WhatsApp charges businesses who wait longer than 24 hours to respond to a customer, and it’s free when a business replies within 24 hours, explained on Facebook’s Business Blog.
- Response < 24 hours: $0.05 cents to $0.09 cents per message delivered
- Response > 24 hours: free
WhatsApp Business has more than 50 million businesses who use it to connect with more than 175 million people worldwide who message those businesses each day.
Though Facebook doesn’t specifically state how much it costs to send business messages past the 24-hour window. A spokesperson did mention it ranges between “roughly half of $0.01 to $0.09 per message delivered” because pricing will vary depending on the county and country the message is sent from and received in.
#2. Click to WhatsApp ads
Click to WhatsApp ads rolled out in August 2018, shortly after WhatsApp Business was released.
To get a sense of how much it costs businesses to advertise using Click to WhatsApp ads, you would need to get a sense of how much it costs to advertise on Facebook through their Facebook Ads Manager.
Through a case study over at Wordstream, they were able to find:
- Cost Per Click (CPC) average: $1.72 (across all industries)
How it works is: (1) the Facebook advertiser creates an ad on Facebook Ads Manager with a Call-to-Action button that will (2) redirect the customer (when clicked) to the WhatsApp app that (3) creates a chat for customers to start a conversation with that business.
Note: Facebook owns WhatsApp, so Click to WhatsApp ads is the brilliance of Facebook integrating their products seamlessly with one another.
Plans on monetizing WhatsApp with in-app ads on hold
Back in 2018 Facebook had planned on making “in-app advertising” its primary form of monetization on WhatsApp. But, as of January 2020, Mark Zuckerberg put those plans to show ads to all of its 2 billion monthly users, on hold.
Facebook was planning to start showing ads in the WhatsApp Status section of the app. A move that could’ve brought in billions for the company, but decided to keep the focus on businesses rather than the user.
One of their main competitors, WeChat, currently has in-app ads showing to over 1.2 billion of their monthly active users.
Tencent, the parent company of WeChat, had $12.7 billion U.S dollars of revenue in 2019, and advertising is estimated to be 20% of their annual revenue, which would be $2.54 billion U.S dollars.
Note: Although Facebook has made the decision not to show ads to their users in-app, they haven’t yet ruled it out in the future.
WhatsApp’s profit and revenue
So with those two (2) sources of revenue, WhatsApp Business & API and Click to WhatsApp ads. How much does that earn the company in a given fiscal year?
Although Facebook doesn’t release WhatsApp’s yearly revenue, Forbes estimated it to be around $5 billion with an average revenue of $4 per user in 2020.
WhatsApp’s funding and valuation
According to the Crunchbase profile, WhatsApp raised its first bit of seed funding on October 1, 2009, worth $250k – just 151 days after the app was first released on May 3, 2009.
Since then, WhatsApp has gone on to raise a total of $60.5 million over 2 more rounds before being acquired by Facebook in 2014. With their lead investor being Sequoia Capital.
What is the WhatsApp business and revenue model?
WhatsApp’s business model is strictly business-to-business (B2B) right now as they try to hold-off on monetizing off their consumer side of over 2 billion active monthly users.