Whatsapp initially started as a status update application in 2009, hence the name “Whatsapp” was coined. The founders of the IM Application, Brian Acton and Jan Koum were ex-Yahoo employees. They had figured the rising communicational needs in society and wanted to produce such an application that would help people stay connected.
The Facebook-owned IM Application converted into a messaging application when Whatsapp 2.0 came out, which resulted in an approximate figurative increase of 250,000 users.
Considering the number of smartphone users in 2009, this was a significant increment in terms of business strategies. However, after their initial goal to attract the audience came the important part of how to generate revenue from their application.
At first, to cover the costs of sending verification texts to the users’ smartphones, they introduced a yearly-subscription fee. However, in 2016, the company announced that the application is now completely for its users and also reclaimed their stance on advertisements.
Then how exactly does the leading cross-platform IM Application generate revenue? Whatsapp’s business model has been a mystery.
Whatsapp remunerative strategy
The founders of Whatsapp were strictly against the idea of bombarding their users. Their motive of the application was to provide the users with an easy-to-use interface and keep improving the user experience. Since the founders’ idea was in the interests of the users, most of them complimented the company’s plan in unusual ways:
Both Acton and Koum were aware of the consequences of advertising, how intelligently do the big companies convert users from being a user to a product himself. However, in order to extract the maintenance costs of the application, they initiated a $1 annual-subscription fee which was encouraged and appreciated by their users.
Whatsapp’s Revenue Generation Strategy
When Brian Acton and Jan Koum started the application, the scope of the application was only limited to allowing users to update their statuses and let me know what they were up to.
However, with the release of Whatsapp 2.0 and the addition of a messaging component changed the dynamics of the application. Upon noticing the potential of his initiative, Acton persuaded five ex-Yahoo employees for a seed fund of approximately $250,000. This resulted in the launch of the application in November 2009.
Since the application had bags of potential to succeed, the initial funding was a stepping stone. The second round of funding came from Sequoia Capital who initially invested $8 million for 15% of the company in April 2011. After monitoring the growth of the application, they invested another $52 million in February 2013 to help Whatsapp’s value jump up to $1.5 billion.
It was due to these substantial investments that Whatsapp decided to drop the annual subscription fee. The investments were enough to serve as the source of income of the 50 staff members of Whatsapp plus the maintenance cost of the application.
The founders adopted a unique strategy of building a network first and then generating money from it. Initially, they filled the users’ needs to have a responsive cross-platform chat application. Later on, they transformed into a replacement of the term instant-messaging application.
Due to their soaring rise, the company was acknowledged by Facebook’s CEO Mark Zuckerberg. He acquired the IM Application in 2014 for $19 billion. This also included the inclusion of Jan Koum on Facebook’s board.
Whatsapp’s Revenue Model
After acquiring Whatsapp in 2014 for $19 billion, Facebook had other plans to generate revenue from the chat-application. Facebook actively used Whatsapp as a user data generation factory to inquire about the users.
Facebook introduced a new business-centered application named as Whatsapp Business. The application allows different businesses to become a verified business on Whatsapp.
Furthermore, it allows premium features such as automatic responses to the customers. Facebook also released the Whatsapp Business API. It can be integrated into different websites to be directed to the corresponding verified Whatsapp Business account.
Whatsapp Business API
While Whatsapp’s Business application is free to use, Whatsapp makes money from its Business API. The API allows you to send shipping confirmations, customized appointment reminders.
However, this could serve as a spamming tool, right? No. Whatsapp caters this problem effectively. The Business API does not allow you to send a message. This way, you can only reply to a user message hence limiting spamming to a great degree.
But, how does the Business API really generate money? Whatsapp’s Business API charges the businesses for slow replies. According to the API, the businesses can respond to user messages for free in 24 hours. But, they will have to pay for every message sent after 24 hours.
Recently, Whatsapp introduced a payments option in the Indian version of their Application. This will help the verified businesses on Whatsapp Business application manage their transactions without involving a third-party.
Whatsapp has some exciting new strategies up its sleeves to attract more revenue. Recently, the application copied Snapchat’s premium Story feature to divert Snapchat’s audience towards their application. According to the Economic Times, the application is planning to allow businesses to promote their products using the Whatsapp Stories feature.