How WhatsApp earns Money? | Secret Business Model of WhatsApp | Dhruv Rathee
WhatsApp needs no introduction today. It has over 2 Billion Users Worldwide and is completely free to use. It was acquired by Facebook (Now Meta) in 2014. But have you ever thought about how does it earn money if it's completely free to use? How did it come into existence? How did it become so famous and dominate similar apps like WeChat, Hike, Line, Viber, etc? Why did the founder of WhatsApp leave the Company? What is the Business Model of WhatsApp? I talk about all these things in this episode of the Business Models Series.
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00:00Hello, friends!
00:01From the good morning messages of the family to the fake messages of WhatsApp University,
00:05WhatsApp has become the most popular messaging app in the world.
00:10It has more than 2 billion monthly active users.
00:13That means 25% of the world's population use this app.
00:18But have you ever thought that this app is completely free to use?
00:22There are no ads on this app.
00:24So how does this WhatsApp company earn money?
00:28In today's video, let's understand the business model of WhatsApp.
00:51WhatsApp was started in 2009 by two people.
00:54Brian Acton and Jain Kaun.
00:56Both of them had worked in a Yahoo company together for 9 years.
01:00And when they left Yahoo, they were applying for different jobs.
01:04They applied on Facebook and got rejected.
01:08They applied on Twitter and got rejected from there as well.
01:11In fact, there is a very famous tweet of Brian Acton from 2009.
01:15When he wrote that he had applied for a job on Twitter,
01:19he got rejected but that's okay.
01:21There is a long way to go.
01:23Even after getting rejected from Facebook, he tweeted this.
01:26It's very ironic because only 5 years later,
01:29Facebook bought WhatsApp for $19 billion.
01:33Before this, it's interesting to know where did he get the idea to make WhatsApp.
01:37Jain Kaun used to go to the gym a lot.
01:40And when he used to go to the gym, he realised that his friends were calling him.
01:43But he couldn't answer the call.
01:45He kept missing the calls.
01:47Then he thought of an app that could tell his status.
01:51If I'm in the gym, my friends will know that I'm in the gym so they won't call me.
01:57So with this basic idea, he made an app called WhatsApp.
02:00The special thing is that there was no messaging in this app.
02:03You couldn't send messages to anyone.
02:05Like you can send messages on WhatsApp today.
02:07This app was only WhatsApp.
02:10The word WhatsApp comes from WhatsUp.
02:12When you ask someone, What's up?
02:14How are you?
02:15You could only tell your status on this app.
02:18You could only tell your status on this app.
02:21You could write that I'm in the gym right now.
02:23This app would notify your friends that you're in the gym.
02:30When you change your status, this app would notify your contacts.
02:34This was the only purpose of this app in the beginning.
02:37But gradually, he realised that some people who were using this app
02:42started using this status thing like a message.
02:45You changed your status, I'm doing this.
02:48Your friend saw your status and said, I'm doing this.
02:52In response, you changed your status and said I'm doing the third thing.
02:57This way, people started using it like a message.
03:00Then he thought, why not make it like a messaging service?
03:04And this idea was extremely successful.
03:07Because in 2009, there was only one more app
03:11on which you could message for free.
03:13And that app was BlackBerry's BlackBerry Messenger, BBM.
03:17The problem was that you needed a BlackBerry phone.
03:21Only those who used a BlackBerry phone could use BBM.
03:25And here, WhatsApp filled in a gap.
03:29Those who used other phones saw that they also needed a free messaging app.
03:35And WhatsApp was that app.
03:37In just a few days, more than 2 lakh downloads were made.
03:40WhatsApp started receiving funding from investors.
03:43WhatsApp's popularity increased rapidly.
03:46Without any marketing, without any ads.
03:49Because people liked it, people shared it with their friends.
03:52And those friends shared it with their friends.
03:54Organic growth was seen here.
03:56Because you'd remember that in 2009,
03:59a lot of money was charged by these telephone companies
04:02to send each and every SMS.
04:04The money was charged on the minutes of calls.
04:06It was very expensive and there was a clear cut free option.
04:09That's why people started using WhatsApp.
04:11In the next 2 years, this app was in the top 10 apps in the App Store.
04:15This was almost right for every country.
04:17Except America.
04:19In America, in 2009,
04:21most of the telephone companies were giving flat rates for SMSes.
04:25And were giving minutes for free calling.
04:27So for the people living in America,
04:29there was no incentive to use WhatsApp.
04:32They kept using their SMSes.
04:34And till date,
04:36America, USA,
04:38are one of the worst performing markets for WhatsApp.
04:40You can imagine,
04:42WhatsApp's growth came from European, Asian and African countries.
04:46If we talk about money,
04:48in the initial days, there was not a lot of spending to use WhatsApp.
04:50They had a small team,
04:52they had made a simple app.
04:54They were not spending on marketing or ads.
04:58So the biggest expense of using WhatsApp
05:02was actually the expense of sending SMSes.
05:05The verification text that WhatsApp sends
05:07whenever a new user joins,
05:09to send the verification text,
05:11the one SMS per user that they had to send,
05:15that was the biggest expense for them in those days.
05:17Now, where did they get the money for this?
05:19They did get some investments.
05:21Seeing them being successful,
05:23other companies wanted to invest in WhatsApp.
05:25They would give them money for buying shares.
05:27But the investments were not coming so fast.
05:29So they thought of a new business model.
05:31WhatsApp started charging $0.99,
05:33$1 per year,
05:35from its users
05:37to use the app.
05:39You heard it right,
05:41WhatsApp is no longer a free app,
05:43but they started charging $1.
05:45But despite this,
05:47their user experience was so good,
05:49the app worked so well,
05:51and on top of that,
05:53new features were being added.
05:55For example, you could send photos via WhatsApp.
05:57So their growth continued.
05:59By 2011,
06:01their app had become
06:03the top app in the App Store.
06:05Acton was very clear about one thing.
06:07They had put a note on their table.
06:09No ads,
06:11no games,
06:13no gimmicks.
06:15They didn't want to keep any ads on WhatsApp.
06:17Nor any useless features
06:19that had no purpose.
06:21They just wanted to keep their app
06:23simple and to the point.
06:25An app was made for messaging.
06:27And this app should be so good
06:29that no other app can compete with it.
06:31People should use it.
06:33Their $1 business model
06:35was very successful.
06:37Within just 3 years,
06:39WhatsApp became a profitable company.
06:41Whatever money they earned,
06:43they spent it on their small team
06:45so that new features could be added to WhatsApp.
06:47If there were any software problems,
06:49they could be fixed.
06:51And a reliable messaging app
06:53could be made.
06:55Your product is our passion.
06:57Your data isn't even in the picture.
06:59We have no interest in taking your data.
07:01But after this,
07:03we enter the story of Facebook.
07:05From where this whole model
07:07started falling apart.
07:09From 2012,
07:11Mark Zuckerberg was trying to buy WhatsApp.
07:13But in February 2014,
07:15this deal was finalized.
07:17And in $19 billion,
07:19WhatsApp was bought
07:21by Facebook.
07:23And all the employees
07:25working in WhatsApp
07:27became employees of Facebook.
07:29The meeting of WhatsApp founders
07:31also took place with Google's CEO Sundar Pichai.
07:33But their deal with Google
07:35was not finalized.
07:37Facebook was so desperate to buy WhatsApp
07:39because Facebook Messenger's
07:41biggest competition was WhatsApp.
07:43And by 2014,
07:45many other messaging applications
07:47had come out in the competition.
07:49Like WeChat, Kik, Line
07:51and Viber.
07:53Facebook saw that if WhatsApp
07:55was bought,
07:57Facebook Messenger and WhatsApp
07:59would not be left in the competition.
08:01Besides, WhatsApp has so many
08:03users' data.
08:05And we can use this data
08:07to earn more money.
08:09Because Facebook runs its company
08:11by selling data.
08:13We'll talk about this in another video.
08:15About Facebook's business model.
08:17After this deal, Acton and Qom,
08:19became billionaires overnight.
08:21If you're wondering
08:23why they sold WhatsApp,
08:25Mark Zuckerberg told them
08:27that they had bought
08:29WhatsApp but
08:31even after buying it,
08:33they would let WhatsApp operate independently.
08:35They agreed because
08:37they wouldn't interfere in their work.
08:39It sounds like a good deal
08:41that they got money
08:43and didn't have to compromise on their values.
08:45But this story doesn't have a happy ending.
08:47Because between Facebook and WhatsApp,
08:49in the coming years,
08:51there was a constant clash.
08:53WhatsApp's team,
08:55WhatsApp's founders,
08:57and the way Facebook was pressurizing them.
08:59In January 2016,
09:01there was news that WhatsApp
09:03had removed its $1 fee.
09:05And WhatsApp again became
09:07a free application.
09:09The reason behind this is
09:11that there were many countries like India
09:13where people didn't have a credit card.
09:15They weren't able to pay the $1 fee.
09:17And many people weren't able to afford it.
09:19Making an app free
09:21helps in developing
09:23a more user-based app.
09:25So they thought that
09:27if they wanted to expand
09:29the number of users
09:31they would have to make the app free.
09:33Now the question is
09:35how to build a business model here?
09:37It was said that
09:39WhatsApp would try to
09:41partner with businesses
09:44to find a source of revenue.
09:46At the same time,
09:48Mark Zuckerberg was being pressurized
09:50by his investors
09:52to spend $19 billion on WhatsApp.
09:54Somehow, they would have to
09:56earn money from there.
09:58Somehow, they would have to show
10:00that buying WhatsApp was profitable for them.
10:02They would have to make WhatsApp profitable
10:04as soon as possible.
10:06Mark put pressure on
10:08WhatsApp's founders.
10:10And the founders
10:12got fed up
10:14and finally, in 2017,
10:16they said that
10:18they couldn't do it anymore.
10:20Brian Acton resigned
10:22from his job in September 2017.
10:24A few months later,
10:26Jan Cown also left WhatsApp.
10:28Saying that
10:30Facebook's opinion on data privacy
10:32and the business model
10:34that Facebook wants to impose on WhatsApp
10:36they don't agree with it at all.
10:38They can't tolerate it
10:40and that's why
10:42they're leaving WhatsApp.
10:44And after 2018, you can say
10:46that Mark Zuckerberg
10:48took over the company.
10:50Brian Acton later started
10:52a non-profit Signal Foundation.
10:54With the help of which
10:56we get this new messaging
10:58application Signal.
11:00You must know that
11:02many people compare Signal with WhatsApp.
11:04They believe that Signal
11:06is a better application
11:08that protects data privacy.
11:10It's a free application like WhatsApp
11:12and the most important thing is
11:14that it's a non-profit application.
11:16This time, Brian said that
11:18forget about the business model.
11:20Whenever we run after money
11:22we have to compromise
11:24on the company's principles.
11:26That's why Signal will remain
11:28a non-profit app.
11:30We don't need to earn money.
11:32We'll give people their data privacy
11:34and a free messaging app that they can use.
11:36Thankfully, today we got
11:38such an app.
11:40But this video is on WhatsApp.
11:42What happened to WhatsApp?
11:44What business model did Mark Zuckerberg come up with?
11:46In 2018, Facebook launched
11:48the WhatsApp Business App.
11:50In this app, businesses can create
11:52their business profiles.
11:54And the verified businesses
11:56can link their websites
11:58and Facebook pages
12:00to this business profile.
12:02Facebook has already established
12:04its own Facebook pages
12:06and WhatsApp.
12:08So people who go to these business profiles
12:10can go to Facebook through this.
12:12They've already made a good option
12:14to promote Facebook.
12:16New users who go to the business profile
12:18can go to the Facebook page with just a click.
12:20Although this WhatsApp Business Application
12:22is completely free to use,
12:24the business API
12:26is used by WhatsApp to earn money.
12:28API stands for Application Programming Interface.
12:30Basically, it's a medium
12:32through which multiple applications
12:34can communicate with each other
12:36or perform a function or task.
12:38For example,
12:40when you book a taxi from Uber,
12:42you must've seen that the map
12:44on Uber has Google's
12:46watermark on it.
12:48Basically, Google Maps is providing
12:50its service to Uber
12:52so that it can show a map on its app.
12:54It's not that Google
12:56created Uber.
12:58What's happening here is that Google Maps
13:00is providing its API to Uber.
13:02It's providing its Application Programming Interface.
13:04Similarly, WhatsApp
13:06is selling its API to businesses.
13:08If businesses want,
13:10when many customers write to them on WhatsApp,
13:12they can automatically respond
13:14to queries.
13:16But if they use
13:18WhatsApp's API,
13:20they can sell shipping confirmations, appointment reminders
13:22and event tickets to their customers.
13:24The model of earning money is
13:26that if businesses reply within 24 hours,
13:28they get a free message.
13:30But if they want to
13:32reply within 24 hours,
13:34they have to pay a fee.
13:36The fees are different
13:38for different countries.
13:40In this table, you can see
13:42the fees for different countries.
13:44For India, it's โน0.0038.
13:46For the first 250k messages.
13:48Which is basically around โน30.
13:50You might ask
13:52who are these businesses
13:54that are using these services?
13:56The answer is
13:58those companies that deal with millions of customers.
14:00Like airline tickets,
14:02travel tickets, movie tickets
14:04or big banks.
14:06The big companies that use
14:08WhatsApp's Business API are
14:10Singapore Airlines, Booking.com,
14:12Uber, MakeMyTrip, Netflix.
14:14These are some examples.
14:16Facebook didn't stop here.
14:18It's looking for ways to
14:20earn more money from WhatsApp.
14:22That's why they've added a payment option.
14:25It's for Indian users
14:27to make P2P payments.
14:29WhatsAppPay is also
14:31launching a service
14:33to earn money.
14:35Although WhatsAppPay is free for ordinary people,
14:37businesses
14:39will have to pay a flat 3.99%
14:41fee for every transaction.
14:43In November 2020,
14:45WhatsAppPay was launched in India.
14:47It was expected to be
14:49a popular feature.
14:51Thankfully, in our country,
14:53the UPI exists.
14:55It doesn't charge much
14:57from businesses.
14:59That's why WhatsAppPay
15:01has only reached 0.02%
15:03of the UPI volumes.
15:05In total, 2.6 million transactions
15:07have been made on WhatsAppPay.
15:09It's worth
15:11โน104 crores.
15:13Besides this, Facebook is thinking
15:15to launch ads on WhatsApp
15:17to earn more money.
15:19It's being planned that
15:21ads will be launched on Facebook.
15:23In total,
15:25how much revenue does WhatsApp generate
15:27for Facebook?
15:29We don't have detailed information about it.
15:31Unlike the videos
15:33of the old business model
15:35which had publicly available data.
15:37Because WhatsApp is a part of the Facebook company.
15:39That's why Facebook doesn't
15:41show a separate revenue breakdown
15:43of WhatsApp.
15:45An estimate was made by Forbes
15:47in 2017 when
15:49they said that
15:51WhatsApp can generate
15:53$4 to $12 per user.
15:55WhatsApp's Indian division
15:57earned a total of
15:59โน6.84 crores
16:01in 2019.
16:03And their profit
16:05was only โน57 lakh.
16:07They spent โน3.43 crores
16:09to pay salaries to employees.
16:11And โน1.3 crores
16:13to promote business
16:15in legal and professional fees.
16:17That's why in 2018,
16:19WhatsApp lost โน5 lakh
16:21from India's operations.
16:23In India, it is estimated that
16:25more than 10 lakh businesses
16:27use the WhatsApp business app.
16:29And 50 lakh businesses
16:31use it worldwide.
16:33As more businesses use WhatsApp
16:35to sell their products and services,
16:37a concept of WhatsApp Commerce
16:39emerges.
16:41Where many businesses
16:43sell their products
16:45and services.
16:47In April 2020, Facebook
16:49invested $5.7 billion
16:51in Reliance Jio.
16:53After this deal,
16:55JioMart, Reliance's e-commerce platform,
16:57started using WhatsApp
16:59for transactions.
17:01So basically,
17:03WhatsApp is being made
17:05a product on which
17:07things will be sold,
17:09payments will be made
17:11and you can see ads on it.
17:13Apart from this, what is Mark Zuckerberg's
17:15plan regarding WhatsApp's data?
17:17We don't know much about it
17:19but we do know that
17:21there has been a controversy
17:23regarding WhatsApp's privacy policy.
17:25People are questioning
17:27how WhatsApp's data
17:29will be used in the future.
17:31Some people accuse Facebook
17:33of definitely using the data
17:35to earn more money.
17:37Time will tell.
17:39But I hope you found this story
17:41informative.
17:43See you in the next video.