You might be thinking “What is WhatsApp business model, if they are not showing ads how they make money??” Well, I will explain.
What’s up primary revenue steam is from database management. They save all our conversations and they are needed because our conversations reflect our preferenceses, likes and dislikes which is very valuable information for companies in order promote the right products to the right people.
WhatsApp’s users have been increasing very fast while outnumbering its competitors:
With so many users, the conversations exchanged on a day are estimated to exceed 11 billion.
In case you didn’t know, WhatsApp has been bought by Facebook, so Facebook with all that amount of data (Facebook + Messenger + WhatsApp) is able to build the perfect advertising platform which can serve to show ads only to she right customers and so be monetized like crazy. It is very similar to Google who has endless information about people and is the perfect advertising platform.
Watch this Ted Talk which perfectly explains this concept:
You can also read this article on How WhatsApp Makes Money.
So, yes, this is how free apps like what’s up make money.
WhatsApp is a Tool for Facebook
In fact, WhatsApp doesn’t have a business model of its own. Pretty much it is a tool for Facebook. Facebook’s primary revenue stream is advertising (90% to be more precize). But Facebook needs a lot of information about you in order to advertise to you like what you are linking, disliking, what are you thinking about, what are your interests and Facebook needs a phone number to sign up (or an email) and this is how they track you.
Facebook is using WhatsApp to make thier advertisement platform more stable and better target people.
I use Facebook ads myself and let me tell you, it is powerful. Companies pay millions od dollars on Facebook ads because Facebook ads target the right people.
So forget about WhatsApp itself, you have to see the big picture of WhatsApp and Facebook together to understand how it makes money.
What Facebook does is balancing between happy advertisers and happy users. The big deal lies not on WhatsApp fees for using the app but on Facebook ads.
The Big Deal: $19 Billion
When Facebook bought WhatsApp in 2014 noone could predict if it was a great investment or just a waste of money, actually the deal turned out to be $19 billion. All financial analysts agreed that this was a daring move. There were no financial records of how much this app could make, the only measure available was that the number of users was skyrocketing.
First of all, Facebook failed to aquire SnapChat offering $3 billion in cash. This played an important deal for it’s future deal for WhatsApp.
In fact, messaging apps were the fastest growing item in the technology industry.
Zuckerberg also felt the competitors behind by making the first move and entering this market.
Other Ways WhatsApp Makes Money
In some countries WhatsApp costs $1 to download and in some other countries it is free for the first year and after that it has a cost.
What About Other Free Services Like Droppbox?
Comparing Droppbox to WhatsApp is like comparing apples to oranges, their business models have nothing in common. Droppbox makes money by luring people in with a free service and offers additional features only to paying customers.
That’s a good business model too, which a lot of companies are using. If you are interested in using this business model, you can create a free dating app and make money from the additional features that you offer only to paying companies.
While for WhatsApp are feature is open for every user.