How WhatsApp generates profits despite being a free service

In the last 24 hours I have written more than 100 messages of WhatsApp.

None of them were very exciting. I made plans with my family, discussed work projects with colleagues, and exchanged news and gossip with some friends.

Maybe I need to improve what I do, but even my most boring messages were encrypted by default and used WhatsApp’s powerful computer servers, hosted in various data centers around the world.

For a company, doing something like this is not a cheap operation. and yet neither I nor any of the people I was chatting with yesterday have shelled out any money to use it. The platform has almost 3 billion users around the world.

So, how does WhatsApp make money (or zapzap, as they nickname it in Brazil)?

It is true that it helps that WhatsApp has a large parent company behind it: Meta, which also owns Facebook and Instagram.

Personal and individual WhatsApp accounts like mine are free because WhatsApp makes money from corporate clients who want to communicate with users like me.

Since last year, the companies can create free channels on WhatsApp, to be able to send messages that are read by everyone who decides to subscribe.

But what they pay the most for is access to interactions with individual customers through the app, both conversational and transactional.

In many places this function is still in its infancy, but in the Indian city of Bangalore, for example, It is now possible to buy a bus ticket and choose a seat, all through WhatsApp.

“Our vision, if we do all this right, is that a company and a client can do things correctly in a chat thread” says Nikila Srinivasan, vice president of enterprise messaging at Meta.

“That means that if you want to book a ticket, if you want to initiate a refund, if you want to make a payment, you should be able to do this without having to leave the chat thread and then go back to all the other conversations in your life.”

Companies too you can choose to pay for a link that launches a new WhatsApp chat directly from an ad on line on Facebook or Instagram to a personal account.

Srinivasan tells me that This alone is worth “several billion dollars” for the technology giant.

Meta’s Nikila Srinivasan says the goal is for businesses to increasingly communicate with customers via WhatsApp.

Other messaging applications have followed different paths.

Signal, a platform known for its message security protocols that have become a standard of the industry, is a non-profit organization.

He states that has never accepted money from investors (unlike the Telegram app, which depends on them).

Instead, works thanks to donationsincluding a $50 million cash injection from Brian Acton, one of the co-founders of WhatsApp, in 2018.

“Our goal is to get as close as possible to achieving full small-donor support, relying on a large number of modest contributions from people who care about Signal,” its president, Meredith Whittaker, wrote in a blog post last year.

Discord, a messaging application widely used by young gamers, has a model freemium– Signing up is free, but additional features, including access to games, come at a price.

It also offers a paid membership called Nitro, with benefits including high-quality video streaming and custom emojis, for a monthly subscription of $9.99.

Snap, the company behind Snapchat, combines several of these models. It offers ads, has 11 million paying subscribers (as of August 2024), and also sells augmented reality glasses called Snapchat Spectacles.

And it has another trick up its sleeve: according to the Forbes website, between 2016 and 2023 the firm earned almost $300 million in interest alone.

But Snap’s main source of income is advertising, which generates more than US$4 billion a year.

The Element company, based in the United Kingdom, it charges governments and large organizations to use its secure messaging system.

Your customers use your technology, but They manage it themselves, on their own private servers.

The company, founded 10 years ago, has “double-digit revenues in the millions” and is “close to profitability”its co-founder Matthew Hodgson tells me.

He believes the most popular business model for messaging apps remains the perennial digital favorite: advertising.

“Basically, [muchas plataformas de mensajería] They sell ads by monitoring what people dowho they talk to and then targeting them with the best ads,” he says.

The idea is that even if there is encryption and anonymityapps don’t need to see the actual content of messages being shared to learn a lot about their users, and they can then use that data to sell ads.

“It’s the old story: if you, the user, don’t pay, it’s most likely the product” adds Hodgson.

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