Everyone uses WhatsApp for free [ How WhatsApp makes money? ]

Basically, WhatsApp is a free piece of cross-platform software. You download it for free, you don't pay for the texts, you don't pay for the calls. They claim that it's only free for a year, but in fact, as soon as that year is up, they renew the services. Now, we all know that no one likes to work for free. So why should WhatsApp do it? And how WhatsApp makes money?

WhatsApp was founded in 2009 by Brian Acton and Jan Koum ( both were ex-employees of Yahoo) as an alternative to pricey SMS services. The app allows users to upload their contact book and message anyone who has the app installed at no cost. It is available for iPhones, Androids, Blackberries, Windows Phones, Nokia (NOK ) phones and, most recently, desktops.

Facebook Inc. ( FB ) purchased WhatsApp in February 2014 for $19 billion, and according to the 2014 Facebook Form 10-Q, in the nine months preceding September 30, 2014, WhatsApp generated revenue of $1,289,000. How is WhatsApp making its money?

WhatsApp, like any other startup began its journey as a small team of engineers working together. The founders had made it clear that they will not resort to advertising as their business model. Online advertising is a proven model wherein the brands provide money to show their advertisements to the users.

Business Model

WhatsApp earns $0.99 per download on iOS. In some countries, the app costs about $1 to download; in others, the first year is free but, each subsequent year costs $1. With over 700 million active users and about 1 million new users per day, yearly revenue can be estimated at $700 million per year.
WhatsApp is adding around a million users per day. With SMS apps, growth is exponential – when one person in a social group downloads and advocates using the app, many new users download the app in order to communicate with the original person. These new users then encourage other members of their other social groups to use the app.

By increasing market penetration, the app becomes indispensable and the user base grows. As the user base grows, not only does the subscription service of $1/year bring in substantial revenue but advertising and alternative forms of monetization create hearty revenue.

Revenue Model

1. WhatsApp allows it's user to enjoy the services for free. As stated on WhatsApp official blog that it is absolutely free and charges nothing and this is indeed true. WhatsApp earns $1 per download on iOS and $1 per year on other platform such as, Android, Windows and Blackberries. Even with a large user base, the company's revenue might be hundreds of millions of dollars.

WhatsApp allows it’s user to enjoy the services for free for first year. However, after that in some countries it charges $0.99 for continued service.

2. Whatsapp is primarily through database management. Basically, bigdata implies to large amount of data which can be both structured or unstructured which is analyzed for statistics and usually predicts the behavior of users on internet.

People generate huge amounts of data on a daily basis. The data includes our shopping searches, our surfing history and interests. When we type any message in WhatsApp, the message pass through the WhatsApp server and then to the user. The server analyse the  data based on the words used. Big companies pay huge amounts of money for this type of data in order to optimize marketing and advertising campaigns.

All the conversations on WhatsApp are backed up on WhatsApp servers constantly. Our conversations reflect our interests, likes, dislikes and majorly depicts our preferences. This information is invaluable to big firms where relevant tailor made products can be offered after data sorting.
WhatsApp users have been ever increasing since the launch currently numbering out users on any other competitor.

Given such high number of users, the number of messages exchanged per day is also incredibly high in case of WhatsApp peaking as high as 11 billion. With such extensive information available on WhatsApp backups, the big companies are willing to pay handsome amounts for information extraction.
This data management scheme is merely a speculation. As evident, WhatsApp is not involved in ad marketing. Any user can vouch for the fact that it does not support advertisements. WhatsApp’s CEO Jan Koum clearly states that WhatsApp is meant for instant messaging and forcing advertisements would disrupt the sole meaning of that. There is no way to justify the data management ideology, but then there is no other justified revenue model as well in the store.

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