How Does WhatsApp Make Money?

There are two primary revenue streams WhatsApp leverages to make money, including WhatsApp Business, which allows enterprises to automate customer service, manage inventory, and facilitate secure online transactions, and WhatsApp Pay, which is a payment feature that allows users in select countries to send and receive money within the app.

WhatsApp is the most used instant messaging platform in the world. By Q2 2023, the platform had more than 2.7 billion monthly active users, which equates to one-third of the global population.

That said, either you or someone you know very likely uses WhatsApp on a regular basis. If you’ve ever wondered how it can continue to exist while being completely free to use, then this article might help to shed some light on that very question.

Ultimately, WhatsApp was acquired by Facebook in 2014, and it has since shifted its focus away from a paid subscription model. Here, we’ll cover the current WhatsApp business model in depth, talk about the platform’s relationship to its parent company, Meta, and cover all the different sources of revenue for the instant messaging powerhouse.

Understanding the WhatsApp business model

Free-to-use platforms such as WhatsApp often rely on backend processes in order to monetize their business as opposed to charging users a fee. However, WhatsApp has not always used this kind of business model.

The original WhatsApp business model

At its inception, WhatsApp’s founding team struggled to find ways to effectively monetize the instant messaging platform as they wanted to avoid in-app advertisements completely. As a result, a paid model was briefly introduced where users had to pay $1 to use the app on an annual basis. By the time this feature was scrapped, WhatsApp had approximately 700 million active users.

So, why would WhatsApp scrap its annual subscription service in favor of keeping the messaging app free to use?

WhatsApp in the Facebook era: How does owning WhatsApp benefit META?

Facebook bought WhatsApp in a $19 billion dollar deal back in 2014, and the company soon announced that it would be making changes to the way that WhatsApp operates. Instead of offering a reasonably priced subscription model, WhatsApp would be free to use, and Facebook would allow businesses to access the application and reach their customers directly — thus shifting WhatsApp from a business-to-customer (B2C) model to business-to-business (B2B) instead.

The WhatsApp data engine was crucial in this decision. With 2.2 billion active users at the time, leaders at Facebook sifted through WhatsApp’s data analytics and found that it could prove extremely valuable to businesses around the world. Since the acquisition, WhatsApp’s data collection has been fed into Facebook and Instagram’s targeted advertising algorithms and the instant messenger now plays an important role in the way that Meta generates revenue across all of its social platforms.

To find out more information about Facebook’s relationship to WhatsApp, read our article Who Owns WhatsApp? here.

WhatsApp today: How does the instant messenger make money?

While targeted advertisements generate significant revenue for Meta thanks to the data collected from WhatsApp and the other platforms under its umbrella, the instant messenger has introduced several additional revenue streams in recent years:

• Business API
• WhatsApp Business app
• WhatsApp Pay
• Advertising

Ultimately, WhatsApp represents a small portion of the Meta business model and Meta keeps the specifics of WhatsApp’s earnings private. However, it is estimated that the changes to WhatsApp’s sources of revenue helped it generate $906 million in 2022. We’ll dive into each of WhatsApp’s revenue streams in depth just below.

How does WhatsApp make money?

Business API

WhatsApp provides an application programming interface (API) for businesses that allows them to communicate with their customers directly through the app. Businesses can pay a recurring fee to access this functionality, and can plug the WhatsApp API into their own website to seamlessly interact with visitors, among other functions.

The business API allows businesses to send messages and provide their customers with important notifications, as well as to communicate directly as part of their customer support procedures.

WhatsApp Business app

WhatsApp offers a separate app called WhatsApp Business, designed specifically for small and medium-sized businesses (SMEs). While the app itself can be free to use, it offers a selection of additional features that are charged on a usage basis, such as global calls for customer support.

WhatsApp Business reportedly generated $333.6 million in revenue in 2022. Source: Statista

WhatsApp Pay

In India and in Brazil, WhatsApp has introduced a payment feature that allows users to send and receive money through the app. This feature, known as WhatsApp Pay, takes a small percentage of each transaction and is therefore able to generate revenue for the platform itself.

Advertising

Since WhatsApp provides data for Meta Ads Manager, it can safely be assumed that the platform benefits indirectly from the advertising spend of businesses on both Instagram and Facebook.

Additionally, WhatsApp has tested out in-app advertisements itself in recent times. The platform’s Status feature includes the occasional advertisement in certain regions around the world but as of the time of writing, in-app advertisements are not widespread.

It was reported in September that there was some internal resistance at Meta to the idea of in-app advertisements on WhatsApp. Since then, Meta has confirmed that in-app advertisements are still in the works and that they could expand beyond Statuses and be found in WhatsApp’s Channels feature in the future.

FAQs

Who owns WhatsApp?

WhatsApp was bought by Facebook in 2014 in a $19 billion dollar deal. Since then, Facebook has also acquired Instagram, and the company is now known as Meta Platforms (NASDAQ:META).

How does WhatsApp make money if it’s free to use?

WhatsApp makes money in several ways. One of its primary sources of revenue is Meta Ads Manager, which contributes significantly to the business model of WhatsApp’s parent company, Meta.

On top of WhatsApp’s data analytics that support advertising spend from businesses across Facebook and Instagram, WhatsApp has several revenue streams that are unique to the platform. Among these revenue streams are WhatsApp Pay, WhatsApp Business, and a third-party API that can be plugged into online platforms for seamless B2C communications.

Will WhatsApp always be free to use?

It’s very likely that WhatsApp will always be free to use. While it has had a paid subscription model in the past, Facebook modified this model shortly after acquiring WhatsApp in 2014 and WhatsApp has since introduced several other revenue streams that focus on B2B relations as opposed to B2C.

Despite removing the paid subscription model, it is estimated that the revenue generated by WhatsApp was 29% higher in 2022 than it was before Facebook took over (when adjusting total paid users to find a quarterly revenue average). With that in mind, there seems to be little need for WhatsApp to return to a paid model for its users.

The bottom line: There are several major revenue streams for WhatsApp and the platform continues to expand its B2B offer

Despite WhatsApp being completely free for the end user, the shift from B2C to B2B after Facebook took over has served the platform well. In addition to several unique revenue streams, data from WhatsApp now plays an important role in Meta Ads Manager, which is in high demand among businesses seeking to advertise their goods and services to billions of people around the world.

While WhatsApp likely does not need too many additional sources of revenue because of the role it plays for Meta Platforms, it continues to expand its presence in B2B markets nonetheless. From a new digital payment solution in India and Brazil, to a business-specific application that allows seamless interactions between third-party SMEs and their customers, WhatsApp continues to solidify its position as an important medium of global communication.

If you’d like to find out more about how to invest in WhatsApp, check our article on WhatsApp stock where we discuss a possible IPO date for the instant messenger.