How WhatsApp and Other Messaging Apps Make Money

In the past day, I have sent over 100 messages through WhatsApp. None of these messages were particularly thrilling; they consisted of routine conversations with family, work discussions, and some casual exchanges with friends. Despite their mundane nature, every one of these messages was encrypted, passing through WhatsApp’s sophisticated computer servers located across global data centers.

Operating such a service isn’t cheap, yet neither I nor any of my contacts have ever paid for the privilege of using WhatsApp. The platform now boasts nearly three billion users globally. So, how does WhatsApp generate revenue?

One key factor is that WhatsApp is owned by Meta, the massive parent company that also runs Facebook and Instagram. This corporate backing plays a significant role in keeping personal WhatsApp accounts, like mine, free for users. WhatsApp’s revenue stream comes primarily from corporate customers who seek to communicate with individuals like me via the app.

Since 2023, businesses have been able to create free channels on WhatsApp, allowing them to send messages to users who subscribe to receive updates. However, what companies are willing to pay a premium for is the ability to engage in personalized interactions with individual customers, whether conversational or transactional. These paid interactions allow businesses to build stronger relationships with users directly within the app.

While this model is still gaining traction in places like the UK, it’s already much more developed in other regions. For example, in the bustling Indian city of Bangalore, you can now book a bus ticket and select your seat, all through WhatsApp.

Nikila Srinivasan, Meta’s vice president of business messaging, explains their broader vision for WhatsApp: “Our vision, if we get all of this right, is a business and a customer should be able to get things done right in a chat thread. That means, if you want to book a ticket, if you want to initiate a return, if you want to make a payment, you should be able to do that without ever leaving your chat thread. And then just go right back to all of the other conversations in your life.”

In addition to direct messaging, businesses can pay for a link that allows users to launch a WhatsApp chat directly from an online advertisement on Facebook or Instagram. This feature alone is now generating billions of dollars for Meta, according to Srinivasan.

WhatsApp isn’t the only messaging platform trying to balance user growth and profitability. Other apps have explored different methods of monetization.

Signal: A Different Approach

Signal, another widely used messaging app known for its stringent security protocols, has chosen a different path. Unlike WhatsApp and other platforms, Signal operates as a non-profit organization. The platform asserts that it has never accepted funding from outside investors, contrasting with the likes of Telegram, which relies on investor support.

Signal runs on donations. In 2018, it received a major boost from Brian Acton, a co-founder of WhatsApp, who donated $50 million. Signal’s president, Meredith Whittaker, detailed their funding philosophy in a blog post last year: “Our goal is to move as close as possible to becoming fully supported by small donors, relying on a large number of modest contributions from people who care about Signal.”

Discord: Freemium and Paid Models

Discord, a messaging platform primarily used by gamers, operates with a freemium model. While it’s free to sign up, the platform offers additional features, including access to games, for a fee. Discord also provides a premium membership service called Nitro. Subscribers pay $9.99 per month for benefits like high-quality video streaming and personalized emojis.

Snapchat: A Blend of Approaches

Snapchat, developed by Snap Inc., has adopted a combination of revenue models. As of August 2024, the platform has 11 million paying subscribers. These users pay for Snapchat’s premium features, which include augmented reality glasses, known as Snapchat Spectacles.

Advertising, however, remains Snap’s primary source of revenue, bringing in more than $4 billion annually. Moreover, Snap has profited from interest, generating nearly $300 million between 2016 and 2023, according to Forbes.

Element: Secure, Custom Messaging

Element, a UK-based messaging app, serves a unique niche. It charges governments and large organizations to use its secure communication platform. Element’s clients operate the technology on their own private servers. According to its co-founder, Matthew Hodgson, Element is generating “double digit million revenue” and is close to profitability.

Hodgson believes that despite the variety of models, advertising remains the dominant business model for messaging apps. He points out that many platforms rely on monitoring user behavior to serve targeted ads. “Basically [many messaging platforms] sell adverts by monitoring what people do, who they talk to, and then targeting them with the best adverts,” Hodgson explains.

Even with encryption and anonymity protocols in place, these platforms can collect data about user behavior without needing to see the actual content of the messages. This data is then used to tailor advertisements for users. Hodgson adds, “It’s the old story – if you the user, aren’t paying, then the chances are that you are the product.”

Diverse Models for Different Apps

The strategies employed by these messaging platforms highlight the diversity of revenue models available in the digital age. While WhatsApp’s integration with Meta’s vast advertising ecosystem and business messaging system provides one model, platforms like Signal and Element take vastly different approaches by focusing on security and privacy, without relying on advertisers.

Meanwhile, apps like Discord and Snapchat use a combination of paid features, memberships, and advertising to generate revenue. These models allow for a balance between offering free services to users while generating income through other streams, like paid subscriptions or ads.

At the end of the day, despite the range of business models, there’s a fundamental question users need to ask themselves when using free apps: If I’m not paying for it, how is this service being paid for? The answer often points to hidden costs, whether they are in the form of data collection for targeted advertising or requests for donations.

For WhatsApp, with its nearly three billion users, the business strategy remains tied to its ability to attract businesses and charge them for engaging with users. Other apps, like Signal, will continue to seek support from their users directly, appealing to those who value privacy and wish to keep the service free of investor influence. Ultimately, how each platform sustains itself will depend on the values and needs of its users, as well as the broader market forces at play in the tech industry.