The WhatsApp business model can be considered a multisided platform that connects users that wants to message each other for free securely, independently of it’s cellphone operating system. Whatsapp has recently added businesses as its customers. Let’s find out why!
Today the most used instant messaging application worldwide, without any competition threat even visible in its rearview mirror. In February 2020, the app already had more than 2 billion users, spread over more than 180 countries.
However, the most curious issue about the WhatsApp business model lies precisely in the fact that it is a free service and, even more surprisingly, without any ads! But then, the question remains: how does WhatsApp make money?
A brief history of WhatsApp
WhatsApp was born in 2009 – yes, it has more than a decade of existence – from the minds of two former employees of Yahoo Company, Jan Koum, and Brian Action. The initial idea was to be a status update application, so the pun with the expression “What’s up?”.
But its version 2.0 has established itself as an instant messaging app, and has not changed since. It ended up replacing SMS, but through an internet connection. Its massive growth in the first four years attracted many eyes to the company.
WhatsApp’s development was financed by an investment of $ 250,000 from five former Yahoo friends. However, further ahead, there were two other rounds of investment, this time from the Sequoia Capital fund, with a total amount of US$ 60 million.
Initially, the WhatsApp business model was paid, and it worked through an annual subscription, which was paid at the time of installing the app. In 2013, the annual fee dropped to one dollar, being the first year of use completely free.
At the beginning of the following year, in February 2014, WhatsApp was acquired by Facebook, for about 19 billion dollars. Its founders joined the board of the organization led by Mark Zuckerberg. However, shortly afterward, both left the company, due to disagreements with the Face‘s owner.
And in January 2016, the subscription model came to an end, leaving WhatsApp with no apparent revenue stream. But we know that no business can be sustained solely by the admiration of users. So, let’s take a look at the WhatsApp business model canvas.
WhatsApp Business Model Canvas
The Whatsapp Business Model can be explained in the following business model canvas
Value Proposition of WhatsApp
- Convenience: the user can communicate with anyone else in the world who has access to a smartphone with internet, through an absolutely simple interface and instant contact.
- Cost: users can keep in touch via text and voice messages or internet calls and even share files at no cost.
- Security: all messages sent via whatsapp are encrypted. This prevents the leakage of information exchanged privately.
- Features: over the years, WhatsApp has been including new features that make sense to its audience, such as an in-built camera, group chat for up to 256 people, sharing status and sending files up to 100 MB.
- Business: there is an application for companies, by which businesses can be promoted through advertisements. Companies can even create catalogs for releasing (now the business model is starting to make a little more sense, isn’t it?).
Customer Segments of WhatsApp
Any smartphone user is a potential WhatsApp customer. From children to adults, for personal or professional contact, and with particular value for those who need to communicate at long distance, at low – or no cost.
Key Partners of WhatsApp
In addition to these, its key partners include mobile companies, internet providers, OS integrators, app stores, and more.
Key Resources of WhatsApp
Certainly the most important key resource is the infrastructure of the app itself, especially its server and the platform. In addition, its human resources team, with engineers, programmers, developers, designers, marketers and etc. And, of course, the WhatsApp brand that laid its foundations on the concept of zero advertising.
Key Activities of WhatsApp
The key activities of the app aim to ensure the best possible experience for the user. Therefore, they involve software research and development, customer support, and maintenance of data security and information privacy.
Channels of WhatsApp
The mobile app itself is the main channel. Besides it, there would be Google Play, App Store and social media, to a lesser extent.
Customer Relationship of WhatsApp
The customer relationship of WhatsApp includes its zero-ad and free-from-charge policy, customer support, end-to-end encryption and a very user-friendly service.
Revenue Streams of WhatsApp
As already mentioned above, the WhatsApp brand is largely based on the concept of zero ad and no charge. But, as we also questioned, no company survives without revenue streams. So, after all, how does WhatsApp maintain its business model?
How does WhatsApp make money?
Yes, when we talked about the business value proposition, an explanation of where the WhatsApp’s revenue would come from has already begun to be drawn. The functionality here begins by creating business profiles that will become “verified” companies in the app.
This verification allows linking company profiles between WhatsApp and Facebook, with some functional buttons, in addition to configuring automatic responses, linking landline number and integrating WhatsApp Business API. And that is where the revenue streams lie.
WhatsApp Business API allows companies to integrate their systems to contact customers through notifications and messaging. The platform allows sending of messages, appointment reminders, invitations and other interesting means of communication to organizations to be automatically scheduled.
However, WhatsApp charges for slow responses. What does that mean? The messages sent to customers within the first 24 hours of communication are free of charge. However, all messages sent after this period will be charged. And the fees vary from country to country.
And if you are thinking that this business model is doomed to fail because it is enough for companies to respond within the initial 24 hours, think of the volume of customers that airlines and banks need to respond to every day. Or even about a promotion that the company wants to launch later …
It is worth remembering that this business model doesn’t violate the initial rule against ads, because companies cannot contact customers first. Just respond to original contacts. That is, the user will be using WhatsApp to communicate with companies and organizations that they want to hear from and not the other way around.
WhatsApp Payment Service
This service, recently launched, introduces a P2P payment option within the app. It is a feature that allows transfer of values inside the app. In this case, the brand charges a commission for each transaction carried out, in the same way that banks do.
Future revenue streams strategies
But Mark Zuckerberg and company, of course, are not interested in stopping there and are still looking for ways to capitalize on their billions of users.
There are also plans that companies can use the status feature (shared for 24 hours) to promote their business. This, again, doesn’t injure the app’s policy because no user is “obliged” to look at the status, let alone record the contact details of companies on their smartphone. Once again, it’s about showing the customer “just what they want to see”.
Finally, it is worth remembering that when we talk about information security, there is always that doubt: is data not the greatest asset of WhatsApp?
Anyway, thinking about it is just speculation. Mark Z. guarantees that this data will never be used in favor of targeting customers for Facebook ads. Trust is now in the hands of each of the 2 billion users.