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WhatsApp was founded in 2009 by Brian Acton and Jan Koum as an alternative to pricey SMS services. The app allows users to upload their contact book and message anyone who has the app installed at no cost. It is available for iPhones, Androids, Blackberries, Windows Phones, Nokia phones and, most recently, desktops.
Facebook Inc. purchased WhatsApp in February 2014 for $19 billion, and according to the 2014 Facebook Form 10-Q, in the nine months preceding September 30, 2014, WhatsApp generated revenue of $1,289,000. How is WhatsApp making its money?
One Dollar at a Time and Beyond
The short answer used to be $1 at a time. In some countries, the app used to cost about $1 to download; in others, the first year is free but, each subsequent year costs $1 — in other word, WhatsApp had a subscription model. At the peak under this model it has about 700 million users worldwide, yearly revenue can be estimated at $700 million per year at this time.
In January, 2016 Facebook revealed in a 10-Q filing that because WhatsApp was monetized in "a very limited fashion," it may not be generating meaningful revenue in the long term, hinting that the strategy would change. Shortly after WhatsApp announced in a blog post that the era of subscriptions had come to an end, and the messaging app would now be free to use.
There are still no ads in the app, however. "Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from," the company wrote at the time. The goal is to have people communicate directly with i.e. their banks, airlines etc. over the app, while the businesses picks up the bill previously paid through subscriptions.
Though WhatsApp's financial statements isn't public (Facebook doesn't break down its revenue by company), Forbes estimated total revenue to be $5 billions and the average revenue per user to be $4 by 2020. As of March, 2017 WhatsApp had 1.2 billion users.
Is it Really About the Money Though?
Industry insiders have speculated that part of the rationale behind acquiring WhatsApp was for Facebook to access user’s behavioral data and personal information.
With location sharing data, 42 billion messages sent per day, and access to users' entire contact lists, Facebook has access to a ton of personal information – all uploaded and saved on its servers. While Mark Zuckerberg has previously promised that this data won’t be used to improve consumer targeting in Facebook ads, it will be unless the user changes the settings to not share information with Facebook.
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