"Hello,
friends!" "From 'Good
Morning' messages of the family,"
"to the fake messages of WhatsApp University," "today, WhatsApp has become the most
popular messaging app in the world."
They have more than 2 billion monthly active users. Meaning that 25% of the population of the
world use this one app. "But have
you ever wondered," "since
this app is completely free to use,"
"and there are no ads on this app," so how does this company WhatsApp earn
money? "In today's Blog,"
come let's understand the Business Model of WhatsApp. This Blog is powered by Vested Finance. "WhatsApp was founded in the year
2009," by two people: Brian Acton
and Jan Koum. "Before this, the
two had worked together at Yahoo! for 9 years." And when they left Yahoo! "they were applying for jobs at
various companies," they applied
to Facebook but were rejected. They
applied to Twitter but were rejected from there as well. "In fact, in 2009, Brian Acton had
famously tweeted," "in it,
he had written that he had applied for a job at Twitter," "but he was rejected," but he wasn't too disappointed because the
commute would've been too long. He
tweeted something similar after being rejected from Facebook.
"Ironically, just 5 years after this," Facebook purchased WhatsApp for $19
billion. "But before this, it is
interesting to know" where did
they get the idea of creating WhatsApp?
"Jan Koum used to frequent gyms," and there he realised that he wouldn't be able to receive the calls of
his friends. He kept on missing calls. "That made him think that there should
be an app," "that would
should a status that he was in the gym at the moment," so that his friends could see the status
and understand "that since he's
in the gym, they shouldn't call him then." "On this basic idea, he created the
app" WhatsApp. It's interesting to note that this app
didn't have messaging. You couldn't
send messages to anyone. Like you can
do so now on WhatsApp. This app was
simply WhatsApp. The word WhatsApp
came from the words 'What's up?' "Like
you ask people, ""What's up? How are you doing?""" "On this app, you could simply let
others know what you were up to."
Meaning that you could simply post your status on this app.
You could write that you were in the gym. "And the app would notify the rest of
your friends," that you're in the
gym. "When you change your
status, this app notified your friends and contacts." "This app was created for doing merely
this, initially." "But
eventually, he realised that" some
of the users of this app were using
the status as messages. "When one
would change the status to doing something," their friends might update their status
with whatever they were doing. "So the first person would update their
status yet again, in response." "Similarly,
people started using these as messages."
Then they thought that it would
be better to make the app a messaging service. And this idea was a huge success. "Because back in 2009," there was only one other app on which one
could message others for free. That
was the BlackBerry's BlackBerry Messenger (BBM). The problem with it was that you had to have a BlackBerry phone. So only the users of BlackBerry phones
could use BBM. And WhatsApp filled in
a gap here. The users of other phones "felt the need for a free messaging
app," and WhatsApp became that
app. "Within days," "it was downloaded over 200,000
times." WhatsApp started
receiving funding from investors. WhatsApp's
popularity skyrocketed on its own. Without
any marketing or ads. Because users
liked it so much that they told their friends about it. "Those friends told their
friends," and WhatsApp saw
organic growth. "As you'd
remember, around 2009," these
telephone companies used to charge a lot of money for sending each SMS. Calling rates were based on minutes per
call.
They were quite expensive.
And here was a clearcut free option
so people started using WhatsApp.
"Within the next 2 years, this app became one of the top 10 apps in
the AppStore." This was true for
almost every country. Except for
America. "In America, in
2009," "most of their
telephone companies had flat rates for SMSs," and free calling minutes. So this wasn't a great incentive for the
Americans to use WhatsApp. They continued with using SMSs. "And even today," the USA is one of the worst performing
markets for WhatsApp. Can you imagine
it?
"WhatsApp saw its growth due to European, Asian and
African countries. " "Talking
about money," "initially,
there weren't many expenses to run WhatsApp." "They had a small team," they had built a simple app. They weren't spending money on marketing or
running ads. So the biggest expense of
running WhatsApp was actually the cost
of sending SMSs. "The
verification text that WhatsApp sends when a user joins it," "so the one SMS per user they had to
send for verification, " was
their biggest expense at the time. Where
could they get money for this? They
had received some investments. "With
their success, more companies wanted to invest in them." They would give them money in exchange for
their shares. But the investments
weren't exactly pouring in. So they
came up with a new business model. WhatsApp
started charging its users $0.99 "about
$1 per year," they started
charging their users to use this app. "You
heard it right, WhatsApp wasn't a free app anymore." They started charging $1. "But
despite that, the user experience of their app was so good," "and the app worked so smoothly," "on top of it, new features were being
added," like you could now send
photos over WhatsApp. Their growth
continued. "By 2011, their app
had become the top app in the AppStore."
Acton was clear about one thing.
He had stuck a note on his table.
"""No Ads! No Games! No Gimmicks!""" He didn't want to run any ads on WhatsApp. Nor did he want to add features that had no
greater purpose. He wanted to keep the
app simple and to the point. The app
built for messaging. He wanted the app
to be so good at that one thing that
no other app could compete with it. And
people keep on using it.
Their $1 Business Model was very successful. "Within 3 years," WhatsApp became a profitable company. All the money they earned was spent on
their small team. So that new features
could be added to WhatsApp. The
problems in the software could be rectified.
And a reliable messaging app could be created. They claimed that their product was their
passion. And that the users' data
wasn't something that interested them.
That they had no interest in taking users' data. "But after this, Facebook makes an
entry in our story." And this
Model started crumbling apart from here.
Mark Zuckerberg was trying to buy WhatsApp since 2012. But this deal was finalised in February
2014. And WhatsApp is taken over for
$19 billion by Facebook. "And the
employees working in WhatsApp," now
became Facebook employees. WhatsApp
founders had a meeting with Google CEO Sundar Pichai as well. But no deal was finalised with Google. "Friends, if you're feeling inspired
by WhatsApp's story," "and
want to invest in the stocks of big US companies like WhatsApp," then I'd take a small ad break to let you
know that an awesome way to do this is
through Vested. Vested is a
Zero-commission US investing platform.
For Indian investors. "Yup,
you heard it right."
Many people don't know that you can invest in the stock of US-based
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a few years ago, this process used to be very difficult" you had to go to the bank and sign a lot of
paperwork. "But now all of it has
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"And since this is a new company," they have no account opening fees now. "Through this app, you can invest in
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"Apple, Google, Microsoft, Tesla, and the stocks of many
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1,000 people to use the link given in the description" "to download this app," and to add any funds in your portfolio will get a $10 bonus from Vested. "So click on the link given in the
description quickly," and check
out this app. "And I'd like to
give you a small tip while investing,"
don't invest a lot of money in any one company. "Diversify your portfolio," "or else if one company crashes, all your
money would be lost." You have to
be careful about these things. Invest only after sufficient research once
you're absolutely sure about it. Getting
back to the topic. "Facebook was
so desperate to buy WhatsApp," because
WhatsApp was the biggest competition of Facebook Messenger. "And by 2014," several other messaging applications had
popped up in competition. "Like
WeChat, Kik, Line and Viber."
Facebook wanted to buy WhatsApp so that there'd be no significant competition after
they own both Facebook Messenger and WhatsApp. "Apart from this, WhatsApp had access
to the user data of so many people,"
and Facebook realised that they could use this user data to earn more
money. Because Facebook runs its
company by selling data. We'll talk
about this in some other Blog. When we discuss the Business Model of
Facebook. "After this deal, Acton
and Koum, the founders of WhatsApp became billionaires overnight." "If you're wondering about their
reason to sell WhatsApp," Facebook
and Mark Zuckerberg had told them that
they would allow them to run WhatsApp independently even after the
acquisition. That there would be no
interference in their work. Thus they
agreed to sell it. It sounds like a
good deal. They get the money and
don't even have to compromise on their values. But there is no happy ending in this story. Because there were constant conflicts
between Facebook and WhatsApp over the next years. The team of WhatsApp and its founders and the way Facebook was pressurising them. "In January 2016, we get to know
that" WhatsApp had removed its $1
fees. And WhatsApp became a completely
free application again. The reason
behind it is said to be that there are
many countries like India where people don't have credit cards. "So they weren't able to pay the $1
fee," and many people were
actually unable to afford it. "In
this case, making this a free app helps in developing a larger user base," "so they decided that since they
wanted to expand and have more users for their app," they would have to make the app free to
use. "The question then arose,
what should be the Business Model?"
How should they earn money? "During
this time, it was being said that"
WhatsApp would try to get into partnerships with businesses and would try to find a source of revenue
from there. "At the same time,
Mark Zuckerberg was being pressured by his investors" because $19 billion had been paid to
WhatsApp and so they needed to make
some money out of it somehow. Somehow
they had to justify the purchase and show that it was profitable. They had to make WhatsApp profitable
quickly. In a way where they could
earn more money from WhatsApp. "In
turn, Mark pressurised the founders of WhatsApp." "Fed up with this, the founders of
WhatsApp" "gave up finally
in March 2017," they couldn't
take it anymore. Brian Acton resigned
from his job in September 2017. "A
few months later," Jan Koum left
WhatsApp too. "Saying that
Facebook's opinion on Data Privacy,"
and the Business Model that Facebook wants to force on WhatsApp aren't what he agreed to. And that he couldn't tolerate those in any
manner. And so he was leaving
WhatsApp. "Friends, you can say
that after 2018," Mark Zuckerberg
established his control over WhatsApp.
Brian Acton went on to establish a non-profit Signal Foundation. "With this, we got the new messaging
application Signal." "As you
know, many people compare Signal with WhatsApp." And
believe that Signal is a superior app in many aspects. "It protects your Data Privacy," it's a free application like WhatsApp. "And most importantly, it is a
non-profit application." "This
time around, Brian decided that" "he
didn't want to get entangled in Business Models," "because whenever they run after
profits,"
they have to compromise on the principles of the company in
some way or the other. "That's
why Signal would remain a non-profit app," "they wouldn't worry about making
money," "they would ensure
data privacy of the users," and
would provide the users with a truly free messaging app. "Thankfully, we could get an app like
this. " But this Blog is on WhatsApp. So what happened to WhatsApp then? What was the Business Model that Mark
Zuckerberg cooked up? "In 2018,
Facebook launched the WhatsApp Business app." "On this app, businesses could create
their business profiles." "And
the verified businesses," "can
link their websites and Facebook pages,"
with this business profile. Facebook
established a link between Facebook Pages
and WhatsApp. People can use
the business profiles to go on Facebook through the link. They created an excellent option of
promoting Facebook. The new users to
visit the business profiles can now go
to the Facebook Page with a click only.
"Although the WhatsApp Business application is completely free to
use," "but the Business
API," is the source of revenue
for WhatsApp. API is the Application
Programming Interface.
"Basically, a medium through which" multiple applications can communicate with
each other. Or perform a function or a
task. Let me explain this with an
example. "When you book a taxi on
Uber," "you would've noticed
that the map on Uber," has the
watermark of Google. "Basically,
Google Maps is providing its services to Uber." So that Uber can show a map on its app. Google is obviously not the creator of
Uber. "Instead, what's happening
here is that Google Maps," is
providing its API to Uber. It's
providing its Application Programming Interface to Uber. "Similarly, WhatsApp is selling its
API to businesses." "If
businesses want to interact with customers over WhatsApp," "and to automatically respond to the
queries, " "they can do
so," "But if they use
WhatsApp's API," "they can
even send shipping confirmation, appointment reminders" and even sell event tickets to their
customers. The revenue model is that "if the businesses reply within 24
hours," sending the message is
free for them. "But if they need
to reply after 24 hours," they
have to pay a small fee then. The fees
are calculated differently for different countries. "On this table, you can check out the
fees for various countries." "In
India, it is €0.0038" "for
the first 250,000 messages." It
is basically around ₹0.30. You might
ask about the businesses that choose to use these services. "Friends, the answer to it" are the companies that deal with millions
of customers. "Like airline tickets," "or travel tickets or movie
tickets," or large banks. So the users of WhatsApp Business API are
huge companies. "Singapore
Airlines, Booking.com," "Uber,
MakeMyTrip, Netflix," these are
some of the examples of the users. Facebook
didn't stop here friends. Facebook is
looking for more ways it can earn money from WhatsApp.
That's why they have integrated the option for making
payments. "It was started for
Indian users," to make P2P
payments. They're launching a service
known as WhatsApp Pay "from it,
they would be able to earn some more money." "Although, for normal users, it would
be free to use WhatsApp Pay," "but
for the businesses," they would
have to pay a flat fee of 3.99% on every transaction. In November 2020 WhatsApp Pay was launched
in India. It was expected that this
feature would become very popular. "But
thankfully, in our country, Unified Payments Interface (UPI) already
exists." It doesn't charge this
huge commission from businesses. This
is the reason why WhatsApp Pay could reach only 0.02% of the volume of UPI. "In total, 2.6 million transactions
have been completed using WhatsApp Pay."
Their total worth was ₹1.04 billion.
"Apart from this, Facebook is considering running ads on
WhatsApp." So that they can earn
even more money. "It is being
planned that the statuses in WhatsApp,"
would eventually host ads. "Friends,
if we talk about the total revenue WhatsApp generates for Facebook," we don't have detailed info available for
it. "Unlike the other Business
Models on which I made Blogs," they had publicly available data. "Because WhatsApp is a part of
Facebook's company," Facebook
doesn't show an additional revenue breakdown from WhatsApp. "Forbes ran with an estimate in
2017," when WhatsApp had 1.3
billion users. "They estimated
that the average revenue per user of WhatsApp," could be anywhere around $4 to $12. The Indian division of WhatsApp earned a
total revenue of ₹68.4 million in 2019.
But their profit was said to be only ₹5.7 million.
They had spent ₹34.3 million on paying salaries to
employees. "₹13 million on
promoting the business, legal fees and professional fees." "In Financial Year 2018, WhatsApp
incurred a loss of ₹500,000." For
the Indian operations. "In India,
it is estimated that more than 1 million businesses use the WhatsApp Business
app." "And worldwide, about
5 million businesses use it." "With
more businesses using WhatsApp to sell their products and services," the concept of WhatsApp Commerce is taking
shape. "Where many such
businesses have come up," that
sell their products exclusively through WhatsApp. "In April 2020, Facebook made an
investment of $5.7 billion in Reliance's Jio Platforms." "After this deal, JioMart, Reliance's
e-commerce platform" started
using WhatsApp for its transactions. "So
basically, WhatsApp is turned into a product" "on which things can be purchased and
sold," "on which payments
can be made," "and on which,
you may even see ads in the future."
"Apart from these, what does Mark Zuckerberg plan to do with the
data?" We don't know much about
it. But we do know that there was a
recent controversy surrounding the privacy policy of WhatsApp. "People are uncertain about the
future," about how WhatsApp data
would be used. Many people accuse
Facebook of trying to use the data to earn more money. Time will tell. But I
hope that you found the story of WhatsApp to be interesting. And informative. Let's meet in the next blog. Thank you very much!