How does WhatsApp make money?

In the last 24 hours, I wrote over 100 WhatsApp messages.

None of it was very exciting. I made plans with my family, discussed work projects with colleagues, and swapped news and gossip with friends.

Perhaps I need to get more creative, but even my most boring messages are encrypted by default and WhatsApp’s powerful computer servers located in various data centers around the world was using.

This is not a cheap operation, but neither I nor the people I was chatting with yesterday have ever parted with cash to use it. The platform has around 3 billion users worldwide.

So how does WhatsApp (nicknamed zapzap in Brazil) make money?

Indeed, it helps that WhatsApp has a huge parent company behind it called Meta, which also owns Facebook and Instagram.

A WhatsApp account for an individual like me is free. Because WhatsApp makes money from business customers who want to communicate with users like me.

Since last year, businesses have been able to open a channel on Whatsapp for free, allowing them to send messages that can be read by anyone who chooses to subscribe.

But what they are paying a premium for is the ability to access individual customer interactions, both conversational and transactional, through the app.

Although the UK is in a relatively early stage, in the Indian city of Bangalore, for example, you can buy a bus ticket and even choose a seat, all via Whatsapp.

“Our vision is that if we get all of this right, businesses should be able to get things done right in their chat threads,” said Nikila Srinivasan, VP of Business Messaging at Meta.

“So if you want to book a ticket, initiate a return, or make a payment, you need to be able to do that without leaving the chat thread. And then jump right back into all the other conversations in your life. .”

Businesses can now also choose to pay for a link to start a new WhatsApp chat directly from an online ad on Facebook or Instagram to a personal account. Ms. Srinivasan told me this alone is worth “billions of dollars” to the tech giant.

Other messaging apps are taking a different path.

Signal is a platform and nonprofit organization known for its industry-standard message security protocols. The company says it has never received funds from investors (unlike the Telegram app, which relies on investors).

Instead, the company is run on donations, including a $50m (£38m) cash injection from Brian Acton, one of WhatsApp’s co-founders, in 2018. .

“Our goal is to rely on many small donations from people interested in Signal to get as close to full support from small donors as possible,” said company president Meredith Whitaker last year. I wrote it in a blog post.

Discord, a messaging app used primarily by young gamers, has a freemium model, meaning it’s free to sign up but you have to pay for additional features, such as access to games. It also offers a paid membership called Nitro with perks like high-quality video streaming and custom emojis for a $9.99 monthly subscription.

Snap, the company behind Snapchat, combines several of these models. It runs advertisements, has 11 million paid members (as of August 2024), and also sells augmented reality glasses called Snapchat Spectacles.

And the company has another trick up its sleeve: it made nearly $300 million between 2016 and 2023, according to the website Forbes. Just out of interest. But Snap’s main source of revenue is advertising, which brings in more than $4 billion annually.

Element, a UK-based company, charges governments and large organizations a fee to use its secure messaging system. Customers use the technology, but run it on their own private servers. The 10-year-old company has “double-digit sales” and is “close to profitability,” co-founder Matthew Hodgson said.

He believes that the most popular business model for messaging apps is advertising, which is a digital perennial favorite.

“fundamentally [many messaging platforms] “We monitor what people are doing and who they’re talking to, and we target and sell ads to those people with the best ads,” he says.

The idea is that even with encryption and anonymity in place, apps don’t need to see the actual content of messages being shared to figure out a lot about users, and can use that data for advertising sales. This means that it can be used for.

“It’s an old story: If you’re the user and you’re not paying, you’re likely the product,” Hodgson added.