Do you ever wonder, how does WhatsApp make money? Here is the complete answer with details from the beginning of its journey right through to 2020.
Pretty much every young person has used WhatsApp at least once. More than 2 billion monthly active users are sending trillions of messages, photos, videos, contacts, places and more. Many students send their notes, team discussions and even get a new partner through the app; really, infinite things are happening there.
WhatsApp is completely free. You can use it for unlimited sharing. There are no restrictions at all. But how is WhatsApp making money?
Facebook bought WhatsApp in 2014 for $19 Billion..!! Why would Facebook buyWhatsApp with that much money? Really, was it worth? The surprising thing is, still, that Facebook also are not displaying any ads. The billion dollar question, then, is about the money. Today, I’ll give all the answers to your doubts about how WhatsApp makes money.
You may have so many questions about the popular messaging app “Whatsapp”, which might include:
- Is Whatsapp making money? If yes-
- How does WhatsApp make money without ads?
- Is Whatsapp making a profit or a loss?
- How does Online Business work?
- Why don’t Whatsapp tell how they earn money?
- What is the ability or potential of WhatsApp to generate a revenue in the future?
- What is WhatsApp’s business strategy?
- Which is the better business model: SnapChat or Whatsapp?.
Let’s see one by one.
Is WhatsApp making money?
The simple answer is, yes. WhatsApp is making money.
WhatsApp is the world’s No.1 messaging App. It has been downloaded more than 2.5+ billion times. So now you may think, it is making a huge profit. Well, no. This is the very serious question because it shows a mirror of app business. You can make an App without investment and its management cost is also very low compared to other business industries, but the situation is different. Read on and you will understand slowly.
How Does WhatsApp Make Money Without Ads?
You may wonder, in WhatsApp, you don’t see a single advertisement. It is free to download. You can send and receive unlimited messages, photos & videos. So, you may be wondering, how does WhatsApp make money without ads?
The answer is its 1 dollar yearly subscription. (Only in some countries)
But this 1 dollar subscription is not necessary to use WhatsApp..! The highest number users of WhatsApp are from India – but in India, no one pays a single dollar to use it.
A few people pay 1 dollar and these people are mainly from rich countries. They don’t know how to use WhatsApp without paying anything. or they are not taking care of every dollar. But if you do not pay, it will still automatically subscribe you for next year anyway!
WhatsApp is making money using this method only, it would seem. People are just donating 1 dollar, but with so many users, this can add up.
IS WHATSAPP GETTING PROFIT? OR LOSS?
WhatsApp is making money, but it is still making a loss overall.
Whatsapp revenue was $15M & net loss was 232.5M in 2014. In 2017, its net loss increased to 400 million and for 2018 and 2019, its net loss increased to more than a billion! Yes. They are losing 1+ Billion every year!
WhatsApp’s largest user base is in India, but Indian revenue in 2019 was just 6.84 Crore Rupees, which is equal to only $1 Million in US dollars. It is making money, but not getting a profit.
Whatsapp is giving a free service. Now, 1+ billion people are using Whatsapp, and yet, Whatsapp is getting a big loss. Why?
Facebook bought Whatsapp for $19 billion dollars and more than 20 million people are paying $1 dollar per year. Others are using the app for free. The BIG question, then, is why is WhatsApp’s revenue so very low when Facebook’s revenue is high? Why can’t WhatsApp make a profit too? To know the answer to this, read on about online businesses below.
HOW ONLINE BUSINESS WORKS?
WhatsApp have more users than any other app in the world. But WhatsApp is making a big loss. Its revenue is very low. So, is the conclusion that App business is not profitable? Or maybe the entire App business is making a loss?
So many economists and business analyzers say that app business has a huge potential. Is it all fake? Because, if the world No.1 app is not able to get any profit, then how can other apps make money?
There are billions of apps all competing against one another. You may think app business will end with a big crunch.
But no. Never will this happen.
One thing that I want to tell you is that technology-based industries have always had a potential business. You may say, so many technology companies have failed. But net profits of all technology businesses in the world have a greater profit range than other business industries.
There are so many app companies making millions of net profits.
So, how does online business works? Today, more and more of the online market is becoming free to use. Free service providing apps or website make money mainly from advertisements. Google is free and its 97% of revenue comes from advertisements only. That is $100+ billion dollars..! As of 2020 research, Facebook is making money only from ads. 100% of Facebook’s revenue is dependent on ads! If you click any advertisement, the app will get money from the advertiser.
Free service online businesses work like this. Some apps make money from yearly subscriptions or one-time payments and you will get a lifetime license; this is the case, for example, for Microsoft Windows.
There are so many businesses which rely on the online market. For example, nowadays, many people are applying for insurance on the Internet only. Insurance companies make a good website to apply and make payment. Without needing as much office work, insurance companies are still getting a huge profit. They start to give advertisements to related websites like insurance guiding websites. Mainly, they use Google AdWord advertisement platform. When you search in Google for “Best and cheapest car insurance”, for example, the first 3 results will be advertisements, even though their website is not search engine optimized or a higher rank. So, many people simply click on the first result. Then, Google gets money for every click! At least one person will apply out of 100. That’s enough for Insurance companies to make big profits still!
However, Whatsapp launched its business app in 2018 – but it’s not a good revenue generator. WhatsApp will be charged anywhere between 0.5 cents to 9 cents per message sent, depending on the country, according to a Reuters report.
Then Why Isn’t Whatsapp Making a Good Revenue While Some Apps Are Getting a Huge Net Profit?
Whatsapp CEO, Jan Koum, told in one of his interviews that Whatsapp will concentrate only on expanding; that is, they are concentrating only on increasing the user base and its current goal is not to make money. If you are not renewing your account by paying $1, don’t worry – it will automatically renew for you anyway (except for users in a few rich countries). That means WhatsApp isn’t trying to get more revenue and it is only focused on expanding its user base.
So, we can say clearly that WhatsApp is NOT making money. It is in a big loss, even though its users are growing exponentially.
What Is The Ability Or Potential Of WhatsApp To Generate a Revenue In The Future?
If WhatsApp wants to make money, they can generate billions of dollars within a month. Let’s take a scenario or look at some predictions.
- 1+ billion active users.
- Just imagine, WhatsApp displaying ads for 1 month
- Every person at least clicks one ad in a month. (I estimated this as being the minimum; on FB, it is not 1 but 10+ on average per user!)
- Few people will click more than 30 ads.
- Take average as 3 clicks per person. (Take minimum)
- 1.5 Billion X3 ads =4.5 Billion Clicks
- If 1 click gets $2 dollars on average, then 4.5 clicks X $2 = 9 Billion dollars!
That means WhatsApp could generate $ 9 billion/month right now..!
This is not an accurate prediction. Let’s take another prediction.
Above calculation is just based on the current time ability. But WhatsApp has a high potential business.
- Its user base is increasing exponentially. According to Facebook strategy analysis in 2015, at the end of 2018, WhatsApp would reach a 3 billion user-base.
- In that time, people will spend more time on WhatsApp and the average ads click rate also increases from 3 to 5.
- In 2018, the whole economy is slightly higher than it is currently, and also, competition is more. So, advert CPC (click per cost) is slightly higher than the current rate. Take it as $3.
- So, you need to multiply the total answer by a correction factor of 1.38
That is 3 billion X 5 X 3 = 45 billion dollars /month..!!
- This is single monthly revenue of WhatsApp.
For 1 year 45 X 12=540 billion dollars….!
- Again, we need to make some corrections because, over 12 months, total business is slightly increasing as well as users.
- So, again, we need to multiply by correction factor of 1.14 +(Plus) increasing users correction factor of 1.29
540X 1.43 =772.2 billion dollars per year.
So we can predict that, in 2018, WhatsApp could make 772.2 billion dollar revenue.
How are all correction factors calculated?
Correction factors mean, in your childhood, you might have been able to get a few chocolates for 1 dollar. But now, 1 dollar can’t give you the same amount of chocolates that you bought in your childhood. This is due to the changing value of currency and inflation. That means the whole economy is changing and all matters valuations are changing. You can’t predict future profits by using our current valuation. So, we need to find a correction factor to make the right valuation by analyzing economic growth graphs & trends.
Why WhatsApp Can’t Make Money?
A few social media specialists have pointed out that Facebook is a social networking website. So, it has more power to generate revenue than WhatsApp because WhatsApp is just a mobile app. So, this makes it very difficult to display ads. However, the real situation is different.
In fact, WhatsApp potentially has the ability to make money more than Facebook because users spend more time on WhatsApp than Facebook or any other social network. A Facebook user’s average time on Facebook is 16 minutes per day. But the average spending time for a WhatsApp user is much more than Facebook.
So, according to the probability of statistics, more advertisements will be clicked by using WhatsApp. Nowadays, so many people are using WhatsApp on their desktop meaning that WhatsApp could potentially display more ads on big screens than social media platforms such as Facebook.
Displaying ads on mobile devices is very difficult. 67% of Facebook’s revenue comes from the desktop or other big screen users. The remaining revenue comes from mobile, but 70% of Facebook users use their mobiles to open Facebook; this just isn’t representative.
So, you can’t argue that WhatsApp is just a mobile app because many users are using WhatsApp on desktops and other big screens like tablets, large-screen smartphones, etc. So, big revenue is possible, just like Facebook.
What is the WhatsApp Business Strategy
Why is WhatsApp not showing interest in generating revenue, then?
Simply put, Mark Zuckerberg wants a cool app. If ads are displayed, then its “coolness” will decrease. So, his thinking is that, if ads are displaying, then people mightget irritated when they are chatting with their friends.
Already SnapChat, WeChat, and Line were competing with Whatsapp. But Mark’s vision is for the whole world to be within his social network. That is when he will start monetizing the app.
His imagination is very high. His goal is not solely making money; rather, he wants to influence people. He doesn’t have any pressure, either, because Facebook is getting higher profits than expected.
SnapChat already has begun monetizing, making money and raising funds. If you search for it in the Android play store & IOS store, its installs total around 300 million combined. However, WhatsApp’s total installs are at 2 billion combined! That means that WhatsApp’s user-base is already almost 7 times larger than SnapChat. Furthermore, in Whatsapp, monthly active users are at about 1 billion, but in Snapchat this is merely 200 million – 5 times less!
Snapchat’s net worth is nearly 25 billion. WhatsApp’s net worth is nearly 25 billion. This shows that they are equal in net worth. But Whatsapp has a 7-times larger user base than SnapChat. So, how has SnapChat raised its net worth to the same as WhatsApp’s?
The answer is its business model. SnapChat started monetizing, but WhatsApp has not yet started monetizing. Thus, SnapChat is getting a profit, but Whatsapp is making a loss, so investors are not showing interest in WhatsApp relative to its size.
Which is the right business model: SnapChat or Whatsapp?
Now, Whatsapp is under the main Facebook company. You know, it is a big company.
Snapshot is operated by 26-year-old Evan. He needs money to grow the app more, and it is very dangerous to run an app without monetization. In apps, like technology, business has always come with high risk. If a new app comes, people will leave Snapchat, so if he didn’t include monetization to his app, he may not get any single dollar for his 6 years of hard work.
You may then be asking questions about why WhatsApp is taking such a high risk?
Well, WhatsApp is different. Mark wants only a large user-base, not profit. He has already become the richest man thanks to his Facebook platform. WhatsApp is just a kid in comparison to Facebook, really.
Facebook has been installed 4+ billion times & it has more than 2 billion active users and its growth really is like the big bang. So, Mark is now “cool”.
He is very concerned about the user’s experience because his stomach is full, as it were. Once the whole world is addicted to WhatsApp, like Facebook, Mark will then be able to start Whatsapp monetization so that he can get maximum profits.
But Snapchat is different. It is not able to take big risks. If ads get irritating to people, SnapChat may fail to increase its user base, but this is no problem because in that time, he will haved earned billions of dollars, just like Mark Zuckerberg. If his share is decreasing in its value then the income he has made can be invested in other businesses. He can still win at his life! So, we can say that Snapchat’s founder & CEO, Evan’s, strategy is perfect.
But WhatsApp’s strategy is also right! It’s just right for its business model.
So both WhatsApp and Snapchat have perfect business models. We can’t measure all businesses with a single theory – every business is unique!
Want to learn more? Comment below if you still have any doubts & get a reply within 24 hours.
Hi… I am Jack, Co-founder/Editor at WebsitebuilderLy, An entrepreneur with 12 years of Website Creation, Management, Marketing Automation & App Development Experience.