In the past 24 hours, I have written more than 100 WhatsApp messages.
None of them were interesting. I made plans with my family, discussed work projects with colleagues, and exchanged news and chats with some friends.
I may need to improve my WhatsApp performance, but even my very boring messages were encrypted by default, and I used WhatsApp’s powerful computer servers, located in different data centers around the world.
Running these servers is not cheap, and yet neither I nor any of the people I was chatting with yesterday spent any money using them. The platform has about three billion users worldwide.
So how does WhatsApp – or Zap Zap, as it is called in Brazil – make money?
Behind WhatsApp is certainly a huge parent company called Meta, which also owns Facebook and Instagram.
Personal WhatsApp accounts, like ours, are free because WhatsApp makes money from customers and businesses who want to connect with users like us.
Since last year, businesses have been able to create free WhatsApp channels, so they can send messages to anyone who opts in.
But what they pay for is the real rewards: access to interact with individual customers on the app, whether through chat or financial transactions.
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WhatsApp is still relatively young in the UK, but in Bangalore, India, for example, you can now buy a bus ticket and choose your seat, all via WhatsApp.
“Our vision, if we get it right, is that businesses that provide services and their customers can do everything right through a series of conversations,” says Nikila Srinivasan, Meta’s vice president of commerce messaging.
“That means if you want to book a ticket, if you want to return something you bought, if you want to pay for something you bought or a service you got, you should be able to do all of that without having to leave or quit your WhatsApp thread. And then go right back to all the other conversations in your life,” she says.
Currently, businesses can choose to pay for a link that launches a new WhatsApp chat, directly from an online ad on Facebook or Instagram to a personal account. That alone is now worth “several billions of dollars” to the tech giant, Ms Srinivasan says.
Other messaging apps have taken different paths.
Signal, for example, the platform known for its messaging security protocols that have become a norm, has chosen to become a nonprofit. It says it has never taken money from investors, unlike Telegram, which relies on investors.
Rather than taking money from investors, Signal runs on donations, including a $50 million cash donation from WhatsApp co-founder Brian Acton in 2018.
“Our goal is to get as close as possible to getting full support from small donors, relying on a large number of modest contributions from people who care about Signal,” Signal CEO Meredith Whittaker wrote in a blog post last year.
Messaging app Discord, which is heavily used by young gamers, has a freemium model, with free sign-up but additional features, including access to games, for a fee.
The app also offers a paid membership service called Nitro, which includes a range of benefits including high-quality video streaming and custom emojis, for a $9.99 monthly subscription.
Snap, the company behind Snapchat, combines a number of these models. It benefits from paid advertising, has 11 million paid subscribers as of August 2024, and also sells augmented reality glasses, called Snapchat Spectacles.
It also has another trick up its sleeve: According to Forbes, between 2016 and 2023, the company made nearly $300 million from interest alone. But its main source of revenue is advertising, which brings in more than $4 billion a year.
UK-based Element forces governments and large organizations to use its secure messaging system. Its customers use its technology but run it themselves, on their own servers. The 10-year-old company is “in the millions of dollars in revenue and is close to being profitable,” says co-founder Matthew Hodgson.
Hodgson believes that the most popular, profitable business model for messaging apps remains the perennial favorite of digital: advertising.
“Basically, many messaging platforms sell ads by monitoring what people are doing, who they’re talking to, and then targeting them with the best ads,” he adds.
The idea is that even if there’s encryption and anonymity in the app or platform, the apps don’t need to see the actual content of the messages being shared to know much about their users. What they need to do is use that data to sell ads.
“It’s the old story — if you’re the user, and you’re not paying for the service, chances are you’re the product,” Hodgson concludes.
