I think in the past day, I’ve sent more than 100 messages on WhatsApp. I talked about everyday things like family stuff, work, and just chatting with friends. All the messages were private, safe, and facilitated by WhatsApp’s robust servers, strategically located in data centers across the globe.
Operating such a service is far from inexpensive, yet neither I nor any of my correspondents have ever incurred a fee for using the platform, which boasts nearly three billion users worldwide. I’m pretty sure I’m not the only one who often wonders about this. So, what’s the secret behind WhatsApp’s revenue generation?
The key lies in its ownership by Meta, the tech behemoth that also controls Facebook and Instagram. While personal accounts like mine remain free, WhatsApp’s profit strategy revolves around its corporate clientele who wish to engage with users.
Since the previous year, companies have been able to establish free channels on WhatsApp to broadcast messages to subscribers. However, the real value for WhatsApp comes from providing businesses with premium access to individual customer interactions, both for conversation and transactions.
In emerging markets like many African countries, this business model is still in its infancy. Yet, in Bangalore, India, the concept has taken off, allowing customers to purchase and select bus seats directly through WhatsApp.
Our vision, if we get all of this right, is a business and a customer should be able to get things done right in a chat thread.
Nikila Srinivasan, Meta Vice President of Business Messaging
That means, if you want to book a ticket, if you want to initiate a return, if you want to make a payment, you should be able to do that without ever leaving your chat thread. And then just go right back to all of the other conversations in your life.
Other messaging platforms have adopted alternative approaches. Signal, known for its stringent security protocols, operates as a non-profit and relies on donations, including a substantial $50m from WhatsApp co-founder Brian Acton. Its goal is to be sustained by small donors who value the platform’s commitment to privacy.
Discord, popular among the gaming community, employs a freemium model, offering basic services for free while charging for additional features and a premium Nitro membership that includes perks like high-quality video streaming and custom emojis.
Snap, the company behind Snapchat, combines various revenue models, including advertising, a paid subscriber base of 11 million (as of August 2024), and the sale of Snapchat Spectacles, augmented reality glasses. Forbes reports that Snap has also earned nearly $300m in interest between 2016-2023, although its primary income is the over $4bn annually generated from advertising.
For example, in the UK, the company Element charges governments and large organizations for its secure messaging system, which they operate on private servers.
Interviewing Element’s co-founder Matthew Hodgson on approaching profitability, he suggests that advertising remains the most prevalent business model for messaging apps, leveraging user data for targeted ads without needing to access message content.
He points out a familiar adage: if you’re not paying for the product, you likely are the product, highlighting the trade-off between free services and user privacy.
