✉️ The World’s Biggest Messaging App

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Profit Snack
April 30, 2024

✉️ The World’s Biggest Messaging App

By 2015, only six years after its launch, WhatsApp had become the world’s leading messaging app.

Today, WhatsApp’s user base accounts for over a third of all internet users worldwide, with more than 100B messages sent daily

However, when WhatsApp first started, it struggled with a key element of running a business. 

They weren’t making a lot of money. The founders prioritized user experience over profit. 

This commitment to user satisfaction helped them grow their user base… but it wasn’t sustainable for business.

Then, in 2014, something crazy happened. WhatsApp was acquired for $19B. 

How could an app with modest revenue be valued so highly? What is WhatsApp's real value? And why should you care?

Here’s what we got for ya:

  • 📖 The Story of WhatsApp

  • 💸 The $19B Deal

  • 🤫 The True Value of WhatsApp

Read time: 4 min 45 sec

📖 The Story of WhatsApp

WhatsApp has over 2B users worldwide. That’s 2x more than TikTok. 

When WhatsApp launched in 2009, it was just a tool to update your status (‘What’s up?’.)

But soon the two founders Brian Acton and Jan Koum realized they could do so much more.

They made the status update feature into a whole instant messaging app.

They added features like sending images, voice calls, and video calls.

This democratized messaging. In the United States, it was normal to pay for a messaging plan. But in most countries, people didn’t bother. Instead, they used WhatsApp as their primary messaging platform.

WhatsApp’s main concern was not making money, but creating a great app that people wanted to use.

They didn’t want to put ads on their app or use gimmicky tactics to generate revenue.

But, of course, they needed money to run the app. 

So they gave users a one-year free trial and then started charging $1 annually. But if you didn’t pay, you weren’t punished. WhatsApp didn’t enforce the fee. Still, this generated enough money to cover operational costs.

Customers were happy, but it was not a great business model.

At the time, WhatsApp relied heavily on funding from investors. Rather than getting money directly from users, they focused on developing an excellent app to attract more users. And as the user base grew, so did investor interest and funding, which was reinvested into making a better app and attracting even more users. This is called the network effect.

But this wasn’t sustainable. WhatsApp couldn’t rely on investors forever. Eventually, they would expect returns on their investments.

Google saw an opportunity and offered to buy WhatsApp. But their offer was declined.

Then in 2014, something crazy happened…

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💸 The $19B Deal

It seemed like it happened out of nowhere.

All of a sudden, Meta (formally the Facebook company) announced it would be buying WhatsApp.

In 2009, both of WhatsApp’s founders had applied to work for Facebook. Both were rejected. Five years later they became billionaires at Facebook's expense... Funny how the world works.

Now, you might assume that because WhatsApp only generated $1.2M in revenue in the 9 months before Meta’s acquisition, it wouldn’t be worth much.

But you would be wrong.

Meta purchased WhatsApp for a whopping $19B.

For reference, Meta bought Instagram for $1B in 2012.

And Instagram actually makes money…

Are you shocked?

So was I. And then I looked into why WhatsApp is actually so valuable. 

Here’s the secret: If you are not paying for the product, you are the product.

Information about 2B people around the world. That’s what Meta really bought.

Meta ended the $1 subscription fee to make the app more accessible. $1 was nothing compared to the users’ true value. 

Before Meta’s acquisition, WhatsApp shared its commitment to no ads. So far, Meta has honored this commitment.

So how exactly does Meta use WhatsApp?

To users, it appeared that there were no revolutionary changes to the app’s setup. WhatsApp is still an easy way to talk to people internationally without insane phone bills and remains the biggest messaging app globally.

However, behind the scenes, there were significant undisclosed changes that Meta did not tell WhatsApp users about for years. 

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🤫 The True Value of WhatsApp

In 2021, WhatsApp updated its terms and privacy policy to disclose how they share users’ data. 

Many users were not happy with this update. But the truth is, WhatsApp has been sharing users data with Facebook since 2016. The only thing the update changed was users' knowledge about it. 

So what data does WhatsApp share?

Everything. Your phone number, profile picture, name, status, login activity, contact list, purchases, financial information, mobile company, IP address, and location. 

Why? Well, WhatsApp doesn’t have ads. But Facebook and Instagram do. So the more information Meta learns about you, the better they can target you with ads on their other platforms.

User data is the main value of WhatsApp for Meta. 

But that doesn’t mean Meta isn’t trying to monetize on WhatsApp in other ways. 

Here are 2 of their most promising ideas:

#1- WhatsApp Business: WhatsApp wants to become the main communication platform for businesses. WhatsApp could become the home of customer service, purchases, and virtually everything for businesses. WhatsApp Business makes money two ways:

  • Subscription fees. 

  • Penalty charges for every time a business takes longer than 24 hours to respond.

In 2020, the WhatsApp Business app had 50M users. In 2023, that raised to 200M. Some estimates say WhatsApp Business will generate 10B in revenue by 2030.

#2- WhatsApp Pay: You know how you can send Apple Pay over iMessage? Well, WhatsApp is doing it now too. You can transfer money directly from your bank into someone else's. And WhatsApp gets to keep 3.99% per transaction.

Meta is working hard to keep users on their platforms. That way they have no gaps in their data, and they can control consumers. (Meta... Is M for Monopoly?)

It’s important to consider the cost of using a free product, and how you want your data to be used. You don’t necessarily need to stop using WhatsApp, but be aware that your data is the currency.

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