Meta, earlier Facebook (NASDAQ: META), generates 97% of revenue through ads, but its another most popular application WhatsApp which has over 2 billion users doesn’t contain ads. And, it is resulting in the potential loss of billions of dollars every year.
It’s not because they never tried monetizing WhatsApp through ads; every time they did so, the company found itself surrounded by conflicting laws, declining users’ trust, and the threat from competitors like “Signal”, who amassed millions of users overnight just because WhatsApp changed its policy related to data sharing in favour of targeted ads.
However, the core reason behind the difficulty in monetization was that founders Brian Acton and Jan Koum developed WhatsApp on solid principles of safety, security, and barrier-free communication for people worldwide. That’s why they introduced end-to-end encryption, which restricts anyone from reading your chats, not even WhatsApp.
WhatsApp was dubbed a ‘failed launch’ in earlier days. The app failed to create excitement among its early adopters as it was riddled with connectivity issues and frequent crashes. The response from the market was extremely disappointing for the founders and it once reached a level where Koum started thinking about abandoning the project.
Then, suddenly, luck struck!
Apple launched the push notification feature, and it turned the table for WhatsApp.
The push notification feature helped WhatsApp to send messages without opening them. The company modified the WhatsApp function to send push notifications whenever users changed their status. The app quickly became popular with the founder team’s friends, who began to ping one another throughout the day with custom statuses. This was more than just instant messaging.
WhatsApp growth
In October 2009, WhatsApp 2.0 was launched!
In the initial days, the founders charged a $1 yearly fee to cover the cost of sending verification texts. But later, the only monetisation feature of the app was removed to fuel the rapid growth.
Fast forward to 2014, Mark Zuckerberg locked the historic deal by purchasing WhatsApp for $19 billion with an infamous promise of “No games, No ads and No gimmicks.”. The promise, however, restricted Facebook from employing any popular monetisation strategy and left everyone in the dilemma of what benefit the deal brings.
Even in a viral statement, Koum said, “You can still count on Ad-free communication.” Although with no assurity, it will remain the same throughout the app’s lifetime.
And it happened!
In 2016, Facebook revoked the promise with an update in its privacy policy that allowed them to share information and metadata with Facebook. The texts are still end-to-end encrypted because the company never wanted to mess with the core principle of “Privacy.”
However, it is evident that because of the policy update and breach of promise, both founders Acton and Koum left WhatsApp and Facebook.
With a new update, WhatsApp is now allowed to share plenty of information, including your registration information, transaction data, details about how you communicate with businesses, IP address, location information, app use frequency, mobile network, cookies, language and so on.
It brought in data worth billions that helped to transform WhatsApp and other Meta apps, majorly Facebook and Instagram. This significant update is a part of the credit for why Meta apps connect better with users.
The update indirectly helped the business to grow but making money from billions of users was still a distant reality. It was found that introducing ads in the main application might dissatisfy the users; At the same time, the company noticed the growing popularity of business transactions.
So, they came up with an innovative idea of introducing a new feature of WhatsApp Pay and a parallel app called WhatsApp Business.
WhatsApp business is a game changer
The app currently has two variants. First, WhatsApp business for small businesses, which is currently free to use and provide various tools that allow businesses to showcase their products in a catalogue, send automatic messages, quick replies, and labels, allows to connect Facebook and Instagram account, and generate a short link or QR for immediate chats.
Some sources claim that WhatsApp will soon roll out subscription-based plans that are only available to its business users.
In addition, Meta is also aiming to monetise it through a Click-to-Chat advertising system. It is an API that allows users to click WhatsApp’s Click-to-chat links on the web and immediately connect with the business for queries, orders, etc. By paying a very nominal fee, businesses would be able to manage chats across ten devices and create customised links, including their business names.
The second version of WhatsApp Business is for large corporations, where WhatsApp currently charge them after the first 1,000 conversations. The app provides almost similar features but has several restrictions that can only be unlocked after paying a fee.
WhatsApp’s financial statements aren’t publicly available, but this report from Forbes estimates a potential revenue to be $27–$29 billion by Q1 of 2022.
WhatsApp Pay is still not generating revenue, but Zuckerburg is confident about Click-to-message features. The model has already brought billions to the business and expects double-digit growth in the upcoming years.
But how Meta would monetise 2 billion active users of WhatsApp’s main application is a question that everybody is looking for an answer to.
The bottom line
Acton and Koum never wanted to make money from WhatsApp; they built an app where people can communicate safely and for free. That’s why even after six years of acquisition, Zuckerberg finds it challenging to monetise.
It’s not because they cannot do without interrupting user experience because another Meta-owned app “Messenger”, which already contains ads, is also widely popular.
It’s because WhatsApp is widely used for privacy.
Ads and end-to-end encryption can go simultaneously but making people believe it is challenging.
Also, WhatsApp users are sceptical about any privacy change, thanks to the shady history of Meta when it comes to dealing with users’ privacy and data. The Cambridge Analytica scandal is still quite fresh in people’s minds.
Besides, a tiny privacy update can result in Meta losing millions of users besides damaging the brand reputation of the entire company. Perhaps, that’s why Zuckerberg is still refraining from launching ads on WhatsApp.
All said and done, their rapid growth in monetizing the WhatsApp business is remarkable. And the increasing reliance of businesses on Whatsapp is taking it closer to becoming the golden goose for Meta.
