In today’s world of technology and the internet, one of the powerful and reliable online platforms to stay in touch with our surroundings i.e., friends, family, colleagues, etc. is “WhatsApp”. Over the years, this messaging app has become the most demanding and useful chat app for users having smartphones. WhatsApp has aroused as an essential tool in our daily life as we utilize its features for various purposes. The usage of the platform is quite wide and is useful for both personal and professional purposes. We prefer the app to share text or voice messages, images, videos to our dear ones and friends. Also, it enables video calling feature. Professional bodies or businesses are using WhatsApp as a great tool to connect with their customers, stakeholders, and employees. It is viewed as one of the most useful social media marketing strategy platforms in recent years. Different other professional organizations like educational institutions, hospitals, etc. also take advantage of the app to connect with their customers. For example, using WhatsApp video or voice call, education concerns are able to deliver effective tutoring to their students. Similarly, doctors stay in touch with their patients. By offering a wide range of services to its users i.e., text messages, video or audio call, audio message, group chat option, location-sharing service, etc. and now becoming part of Facebook, WhatsApp has come in the category of the largest online chat app in the market.
Few Interesting Facts About Whatsapp
- All over the world, it has maximum monthly active users i.e., over 2 billion as per the latest statistics of February 2020 in around 180 countries. These numbers are higher than the active users of other popular chatting apps such as Facebook Messenger, WeChat, etc.
- India has the maximum number of WhatsApp users i.e., more than 400 million.
A Brief Background of WhatsApp
The discovery of WhatsApp is quite interesting and the initial struggle of its founder represents a great example of dedication and commitment. Brian Acton and Jan Koum are those two gemstones who founded Whatsapp in 2009. It could be hard to believe that there were no advertisements, no game plans or gimmicks behind the initial launching, further success and journey of the app. With a small manpower i.e., 50 employees, Whatsapp generated millions of revenue and hold the top position among other messaging apps like Facebook messenger, WeChat, iMessage, Snapchat, etc.
Initial Phase and Further Journey of Growth
The success story of WhatsApp starts with two former employees (Brian Acton and Jan Koum) of Yahoo Company who brought their idea on board and converted their idea into a successful instant messaging app. Soon both Brian and Jan left Yahoo to look for a different journey of their life. They started with a thought process of developing an iPhone app due to a massive potential for mobile. The initial idea of creating an app was initiated by Jan Koum. Later on, Brian Acton teamed up with him to explore the potential of making such an app that would allow mobile users to interact with their family, friends, and professional contacts. Both noticed a great future in an IM app creation through which users could save a great amount of using bit costly messaging app services. Koum supported the idea by persuading sponsors for funding the app. These sponsors were associates from yahoo and funded $250,000 for the app and finally, in February 2009, founders launched WhatsApp inc. It was named as WhatsApp because it sounded similar to what’s up. Lots of ups and downs, failures, frustrations were faced by the founders but both persisted with their invention and eventually, the success started knocking their door. At first, the app launched in the app store of iPhone and after a couple of months, it was released for Blackberry. The iPhone version was modified in the month of December 2009 that allowed users to share photos and an Android version of the app was also launched in 2010. Without placing even a single ad on the app, both founders became millionaires. Initially, the app was chargeable in the form of an annual fee or initial installation fee and lots of users were ready to pay for this new app. Later on, in 2013 the installation charges were withdrawn and installation became free. Members were supposed to pay an annual subscription fee of $1 hardly. The new feature, voice messaging was also added in 2013 and also, Whatsapp recorded 200 million users and boosted the number of staff members to 50. Further, in the year 2011 and year 2013, Sequoia Capital funded $60 million with the $8 million of the first round and $52 million of the second round to WhatsApp. Next year i.e., in February 2014, Facebook acquired Whatsapp and the deal was closed at $19 billion and this deal became the largest acquisition deal of Facebook. New changes in App services came into the picture after that. The subscription fee of $1 was waived off at the starting of 2016.
An Overview of A Business Model
The wonder is how such a powerful instant messaging app works and how it generates revenue or money. The answer lies in the business model of WhatsApp. Before discussing the business model of WhatsApp, let us first have a look at what exactly the term Business model is and what are its basic elements. In a broader term, a business model is described as a plan of any business or company of how to make a profit for their organization. It includes identifying the products or services for sales, the target market or customers, and anticipating expenses or costs. So basically, a business model of an organization defines its way of making money. It explains that at a particular cost, how an organization can earn profit by delivering maximum value to its customers. A Business model of any business includes below-mentioned elements.
The Business Model of WhatsApp
Following is the business model of WhatsApp.
1. The Value Proposition of WhatsApp
The value proposition is the primary element of a business model. It describes the company’s offerings i.e., products or services and why customers or clients need them. Ideally, it states in what way an organization keeps its products or services different from its competitors. WhatsApp has created great value for its customers. The main value proposition of the brand includes its attractive and reliable features, accessibility, cost, convenience, low-risk factor, and brand value. Let’s have a look at the above value propositions in detail.
1.1) Attractive and Reliable Features
WhatsApp embodied a huge range of features into a single app platform that facilitates users to communicate their belongings in an easy way anywhere in the world. These features include:
- Messaging facility that is both secure and easy to use. Moreover, a much cheaper option for users to use the message facility.
- File sharing option and Multimedia facility.
- Users can upload their contact list and are able to message to any user who has the app without any cost.
- Messages are instant and calls include phone communications and VoIP.
- Grout chat option in which those users can also be added who were not connected on WhatsApp.
- WhatsApp has launched a business application for businesses and employees through which they can promote their business using advertisements. Businesses App is created by keeping small businesses in mind and is free to download. Using the app, businesses can showcase their products or service by creating a catalogue and also, can easily connect with their customers. The app is also an enterprise solution for big companies.
- An in-chat payment feature i.e., Whatsapp payment, using which users can make payments to any person from the WhatsApp contact list. One can both receive and send money using this feature.
- It’s a multi-purpose and real-time messenger app that facilitates users to create groups, exchange audio, video messages, and images, share geographical locations, etc.
- After the acquisition of WhatsApp with Facebook, one can view their WhatsApp users on their Facebook contact list after installing the app. Also, the existing contacts of the phone.
- The next interesting feature of the app is that all WhatsApp messages that we sent are encrypted. As billions of messages forwarded on a monthly basis on the app, this feature has real worth to prevent messages from unauthorized access.
Accessibility is generated by WhatsApp by offering a broad range of options. For example, users can communicate in 60 different languages using the app and also, communication is enabled in desktop as well as mobile formats-specially designed for Android, iPhone, Window PCs, Window phones, Mac Pcs, etc.
Another attractive value proposition offered by WhatsApp to its customers is price proposition in which users are allowed to send and receive messages at absolutely free of cost and thus providing a lucrative advantage to avoid chargeable SMS. Using the calling feature of the app, users can make free calls to people irrespective of their location i.e., in the same country or any other country through an internet connection in their phone.
WhatsApp has created many other things that users can do apart from instant text messaging like:
- To create memories through pictures, the app has given the facility of an in-built camera.
- Users can share videos and pics quickly.
- Users can also send Voice messages as there is a voice recorder option in the app.
- Group chat option is also available and at a time 256 people can be part of it.
- Document of different format types like PDF, word files, spreadsheets, PowerPoint documents, etc. can be forwarded in the message and the size of these documents should be up to 100 MB.
1.5) Low-Risk Factor
The security standards of WhatsApp are quite high, so it reduces the risk factor. It provides encrypted messages and ensures a unique lock along with the key for every communication being exchanges on the app. In other words, we can say that all calls and messages are fully secured and the communication is accessible only to the users who are exchanging information with each other. Security is so foolproof that even WhatsApp itself can’t obstruct it.
1.6) Brand value
The massive success of WhatsApp has established it as a great and powerful brand in the market. The app is growing at the fastest rate and has become a most-used messaging app. The brand value of the app has increased so much that as per current statistics of 2020, more than 2 billion users across the world are using it. 96 million times the app was downloaded in February 2020. The availability of the app is in 180+ countries.
2. Customer Segments
The customers of WhatsApp are massive smartphone users. From teenagers to adults and old-age, all are the active users of it. The target audience of the app is all those users who want to connect with each other for personal or professional communication. This app is a popular tool among users who are staying abroad as they are able to communicate with their family or friends or professional colleagues who are outside their country.
Both small and large enterprises are also active customers of the app. Business owners rely on the app to communicate with their customers and for promotional activities.
3. Key Partners
- The team of WhatsApp did critical partnerships by tying up with more than 50 carriers all over the world.
- One of the great and beneficial partnerships deals was with Sequoia capital that funded a great amount to the brand and played a major role in uplifting the success and its further growth.
- WhatsApp often gets involved in strategic partnerships with mobile companies to expand its services and increase its customer base. Following are the few much profitable deals:
- The brand enabled the customers of Cable & Wireless to access all features of WhatsApp over its networks by entering into a strategic marketing partnership with the company.
- A partnership with E-Plus was placed to facilitate E-Plus customers with pre-paid WhatsApp SIM.
- Acquisition of the brand by Facebook in February 2014 for $19 billion.
- The other key partners of WhatsApp include internet service providers, OS integrators, App stores, different Indian banks.
4. Key Resources
The key resources of WhatsApp can be broadly classified in the following three types of resources.
4.1) Physical Resources
Mainly hardware and software of the app are its physical resources. The hardware of the app is a server-based infrastructure that has to compile a large amount of app’s data and software includes its instant cross-platform messaging app. Also, the cool and attractive features of the app i.e., chat, video and audio calls, group chats, sharing multimedia messages and file sharing, emojis, etc.
4.2) Human Resources
WhatsApp has a brilliant team of engineers that makes a great development team. The brand witnessed huge growth and success in the great leadership of Neeraj Arora who is looking after multiple roles (Marketing, PR activities, and Business Development) and through endless efforts, the dedication of other team members including IT, customer support staff.
4.3) Organizational Resources
- The proprietary software platform of WhatsApp is the major organizational resource of it that provides services to over 2 billion users all over the world. These resources also include its key partners as well i.e., telecom operators, device manufacturers, software developers, etc. that supported the brand to expand its user base. The brand’s investor Sequoia Capital also played a major role in the growth of WhatsApp by extending heavy funding support to it. Also, Facebook acquired WhatsApp in 2014 and by doing so it provided access to WhatsApp of resources of Facebook.
- Organizational resources also consist of 2 billion-plus users of the brand who are utilizing the app every month and strengthening the brand’s position in the market by doing so.
- Another resource is the main principle of the brand which is based on zero advertisement, no games, and no gimmicks.
- The database of users that includes their shopping habits, interest related to the content, keyword research is also part of these resources.
5. Key Activities
Key activities of WhatsApp are focused on a single aim i.e., providing the best messaging app platform to users. These activities include:
- Developing app software
- Enhancing customer support
- To maintain full security and privacy in using the app
- The brand always encouraged and worked on no advertisement strategy model.
The mobile app of WhatsApp is its main channel. Social media posts and website are the promotional tools where the brand promotes its offerings. Other channels are Goggle Play, App store, and different mobile devices.
7. Customer Relationship
WhatsApp customer relationship reflects in different facilities and advantages it provides to its customers like the app is free from charges. It is a self-service and automated facility. Customers can use the service with limited or no communication with the employees and through its main platform. The website of the brand is programmed to answer different queries of users that are asked frequently. In-built e-mail support is there to provide personal assistance. Moreover, zero ad policy, use of social media in fair terms, honest blogposts, end-to-end encryption, etc. are also part of the customer relationship of WhatsApp.
8. Revenue Generation
WhatsApp never worked on the principle of generating revenue through advertisements. The founders of the brand were clear that the app is for the purpose of providing a great experience as an instant messaging app and never aimed at allowing large businesses to place advertisements on the app for promotional purposes. But no business or organization can survive if it doesn’t generate income or revenue. So, the brand introduced a subscription model for some countries in which users were supposed to pay $1 as annual renewal fee charges.
Previous Revenue Generation Strategy (before acquisition by Facebook)
The earlier investors of WhatsApp were the main income source of the brand. The initial funding of $250,000 was done by 5 ex-members of Yahoo Company. Sequoia Capital invested $60 million in two phases i.e., $8 million and $52 million in 2011 and 2013 respectively.
Current Revenue Generation Strategy (After the acquisition by Facebook)
After the acquisition of WhatsApp by Facebook in 2014, the new strategy to generate revenue is planned by Facebook. Below are a few revenue strategies adopted by the brand in recent years.
a) Whatsapp for Business
To facilitate small businesses, a business app was launched in January 2018 i.e., WhatsApp Business. This app was specifically designed for companies to interact with their clients or customers. For large enterprises having an international client base, Facebook has come up with WhatsApp Enterprise Solution i.e., for e-commerce retailers, airlines, and banks. These can offer e-commerce or customer services through WhatsApp chat.
b) WhatsApp Payment Service
Another recent service launched by the brand is Whatsapp payment which is a peer-to-peer money transfer service and currently is introduced in India only. In this, by entering into a partnership with banks, WhatsApp will provide the facility to its users to do payments and money transfers. The brand will be able to earn a commission for such services.
9) Competitor Review
Different competitors of WhatsApp are other messaging apps like iMessage, Viber, Telegram, WeChat, Line, etc. Whatsapp stands at the top in the maximum number of users across the world as compare to its competitors last year i.e., 2019. 1.5 billion Users are reported to last year of Whatsapp. Whereas, Telegram reported 200 million users, Viber-260 million, WeChat-1 billion, iMessage-1.3 billion active users, and Line-187 million users.
Though as of now the WhatsApp business model is less focused on generating revenue from its services but with the new business model or services coming in the future it will be able to generate more revenue.