Social networking has become a vital part of people’s life in the present scenario. Facebook, twitter, Orkut are some examples of social networking sites and Hike, WhatsApp, Line, Wechat, Messenger, Viber etc are some of the examples of instant messaging applications in mobile phones.
Out of these, WhatsApp has rapidly grown in few years whose users have increased from 100 million users to 900 million users till August 2015. WhatsApp was founded by two people, Brian Acton and Jan Koum. It works on almost all operating systems like iOS, Android, BlackBerry 10, BlackBerry OS, Windows Phone, Nokia Series 40, Symbian, Tizen etc. WhatsApp provides a wide range of facilities such as sending messages,smileys,locations, contacts, music and videos. Calling facility was later made available. Due to this high level of flexibility and ease Whatsapp has become very popular world wide.It has a good level of privacy and security. The users can easily change the privacy level of their account, provided by the app.
Facebook (FB) purchased WhatsApp in February 2014 for approximately $19 billion, and according to the 2014 Facebook Form 10-Q, in the nine months preceding September 30, 2014, WhatsApp generated revenue of $1,289,000. How is WhatsApp making its money?
$1 at a time
The short answer is $1 at a time. In some countries, the app costs about $1 to download; in others, the first year is free but, each subsequent year costs $1. With over 700 million active users and about 1 million new users per day, yearly revenue can be estimated at $700 million per year.Facebook’s Form 10-Q admits that the company “[monetizes] WhatsApp in only a very limited fashion, and [they] may not be successful in [their] efforts to generate meaningful revenue from WhatsApp over the long term.” So while the company doesn’t currently have ads or other forms of income, their position could change over time.
Other SMS apps
Outside of America, where sending text messages is more expensive, SMS apps are popular and have successfully monetized. WeChat – the popular Chinese SMS app has ads as well as online games. The company boasted $924 million in revenue in the third quarter of 2014, down from $949 million in Q2, with only 438.2 million users.KakaoTalk, a South Korean SMS app, has 48 million users and $190 million in 2013 revenue. The app makes money from online games, advertising, and from selling emoticons and stickers.
At $2.11 (WeChat) and $3.95 (KakaoTalk) in revenue per user, per year, WhatsApp can earn between $1.47-2.77 billion per year by adopting the competition’s monetization policies. Analysts have calculated that, long-term, WhatsApp could generate $2.50 in yearly revenue per user with about 2 billion users (about $5 billion per year).
Focusing on growth
WhatsApp is adding around a million users per day, mostly in Latin America, India and Europe. With SMS apps, growth is exponential – when one person in a social group downloads and advocates using the app, many new users download the app in order to communicate with the original person. These new users then encourage other members of their other social groups to use the app.By increasing market penetration, the app becomes indispensable and the user base grows. As the user base grows, not only does the subscription service of $1/year bring in substantial revenue but advertising and alternative forms of monetization create hearty revenue.
Is it really about the money though?
Industry insiders have speculated that part of the rationale behind acquiring WhatsApp was for Facebook to access user’s behavioral data and personal information.With location sharing data, 30 billion messages sent per day, and access to users' entire contact lists, Facebook has access to a ton of personal information – all uploaded and saved on its servers. While Mark Zuckerberg promises that this data won’t be used to improve consumer targeting in Facebook ads, it still raises questions about how private our data really is.
Whether you believe that Facebook overpaid for WhatsApp or not, the fact is that the app has a small and growing revenue stream with lots of room to grow. Will the SNS giant aggressively monetize like other SMS apps have done or use it for another purpose? Only time will tell.
Popular messaging and calling client WhatsApp Messenger used to be free for the first year, and then $0.99 per year after that. In an announcement on the app’s blog today, Jan. 18, WhatsApp has revealed that it’s doing away with the yearly subscription fees. Instead, the developers will try to find other ways to make money from the software and service.
Does that mean things like in-app advertisements? According to the blog post, that won’t be the case. In fact, an earlier post points out that one of the goals the developers had when they first began the project three years ago was to “make something that wasn’t just another ad clearinghouse.”
Instead, WhatsApp will begin testing tools that allow businesses and organizations you’re already working with and want to hear from better ways to communicate with you. This could mean your bank contacting you through WhatsApp about whether a recent transaction was fraudulent. Alternatively, it could be your airline letting you know the bad news about your flight being canceled or delayed.
If we analyse the user base, we will find that Whatsapp has the largest user base which is increasing exponentially every year. Naturally when a user starts using an application, the people around also start using the application to communicate. Whatsapp has a cleaner interface which has the sole purpose of communication. The application hosts no advertisements at all. The clean and fast interface along with other features like Voice calling and to be launched Video Calling features make this app one of the most downloaded apps.
Whatsapp, after being bought by Facebook, gives huge revenue of around $19 million a year. The revenue model taken up Whatsapp is by far very simple and the main concept is that the large user base. Whatsapp believes that the application is for communicating purpose, it doesn’t endorse any advertisement as it would hamper its sole utility. It is also evident that if Whatsapp starts putting advertisements in the app, considering its user base, would be able to make a lot of money. But the policies and the user-friendliness of WhatsApp show that it is not completely about money after all
