By Almost ten years have passed since Facebook founder Mark Zuckerberg shook the tech world by announcing his company’s audacious $19 billion acquisition of WhatsApp, a popular messaging app with modest business prospects. In the intervening years, WhatsApp has seen its user base surge, with over 2 billion people now relying on the app for communication, a significant leap from the 450 million users it had at the time of the acquisition. However, despite its growing popularity, WhatsApp has struggled to generate substantial revenue.
In contrast to Instagram, which Facebook acquired in 2012 for approximately $1 billion and subsequently monetized through ads, WhatsApp does not display advertisements, which are the core of Zuckerberg’s business model. It also does not directly align with Meta’s broader initiatives in the metaverse or its efforts to compete with TikTok through products like Reels.
Yet, Meta, the company formerly known as Facebook, has no intention of sidelining WhatsApp. Zuckerberg consistently emphasizes the value of this asset and its potential for growth. He proudly highlights WhatsApp Business, a tool that assists companies in communicating with clients, and envisions WhatsApp as the “next chapter” for Meta.
To transform WhatsApp into a significant contributor to Meta’s bottom line, the company is focusing on attracting large businesses worldwide to use the platform as their primary channel for customer communication. Companies are charged varying fees, ranging from half a cent to 15 cents, depending on the nature of the conversation and the country in which it occurs.
“It’s been clear for many years that people are trying to connect with businesses on WhatsApp,” says Alice Newton-Rex, the product director of the WhatsApp unit. “If you go to India or Brazil and you look around, you’ll see WhatsApp numbers posted up in shop windows everywhere. This is how businesses want to engage with their customers.”
For instance, in India, consumers use WhatsApp to book Uber rides and receive movie recommendations on their Netflix accounts.
Newton-Rex, who joined WhatsApp four years ago, highlights the significant growth in the product management team, which has expanded from 15 to 90 members. This team is now responsible for developing features that can unlock WhatsApp’s business potential and fulfill Zuckerberg’s long-standing vision for the app.
Zuckerberg remains deeply involved in WhatsApp’s strategy, regularly communicating with Will Cathcart, the current head of WhatsApp. “He’s a big part of our strategy,” Newton-Rex notes, underscoring Zuckerberg’s commitment to WhatsApp’s development.
WhatsApp’s global popularity is undeniable, particularly in countries like Brazil, India, and Indonesia, where it has become an essential tool for staying connected with friends and family and staying informed about current events. Its appeal is particularly evident in regions with limited telecommunications infrastructure, where WhatsApp has made affordable smartphone communication a reality.
However, despite its widespread use, WhatsApp’s true value to Meta has long been a matter of debate. The company does not disclose its revenue, but estimates suggest it falls between $500 million and $1 billion, accounting for less than 1% of Meta’s total sales. In contrast, Instagram is projected to generate $40 billion in revenue in a single year.
WhatsApp’s challenge lies in its origins. Co-founders Jan Koum and Brian Acton publicly criticized the advertising industry in a 2012 blog post, expressing disdain for the intrusive nature of ads. In the years following the Facebook acquisition, tensions arose over issues related to data privacy and monetization. Acton left in 2017, followed by Koum a year later.
The app’s core function as an encrypted platform for private messaging makes it less conducive to advertising. Users may not want promotional content to interrupt personal conversations. Nevertheless, Meta, which has primarily relied on ads for revenue, is determined to make WhatsApp a profitable venture.
Meta initiated its WhatsApp Business app in 2018, targeting companies as potential users. The app offers verified commercial accounts and a suite of in-app tools to facilitate communication with customers. Over the past three years, the WhatsApp Business app has seen a fourfold increase in monthly active users, reaching 200 million.
Smaller companies can access the app for free, while larger enterprises can pay for additional features such as creating a WhatsApp website and managing a corporate account on multiple devices. For larger corporations, Meta charges per conversation, with fees varying by country and the complexity of the interaction.
Meta reported that sales in its “Family of Apps-other revenue” segment, which includes the WhatsApp Business platform, grew by 12% year over year to reach $808 million in 2022. While WhatsApp doesn’t display traditional online ads, it offers a unique ad product called “click-to-message.” This feature redirects Instagram and Facebook users to WhatsApp for immediate conversations, generating substantial revenue.
Meta’s click-to-message ads, which run across WhatsApp, Messenger, and Instagram, are expected to generate approximately $10 billion in annualized revenue. WhatsApp-specific click-to-message ads have grown by more than 80% year over year, further contributing to Meta’s overall ad revenue.
Additionally, Meta introduced WhatsApp Channels, a feature designed to function as a “private broadcast service.” Although currently available in limited countries, Meta is exploring ways to monetize this feature, including subscription-based access and advertising.
In the pursuit of monetization, Meta acknowledges the potential of generative artificial intelligence (AI) within WhatsApp. Zuckerberg has mentioned plans to integrate advanced chatbots into WhatsApp and other messaging tools. This development could lead to various business applications and enhance user interactions.
The global business messaging space, valued at approximately $32 billion, currently relies heavily on SMS technology. WhatsApp aims to provide more compelling ways for businesses to communicate with customers, potentially enabling richer interactions beyond simple text messages. However, its expansion in the North American market remains a challenge, with just 21.8% of internet users accessing WhatsApp monthly in the United States.
WhatsApp’s appeal in North America largely revolves around immigrant communities with ties to family members in other countries, making it a gateway to online interactions for many. The app’s robust encryption technology also attracts users in regions with oppressive governments, whereas consumers in the United States have alternative messaging platforms like Apple’s iMessage and direct messages on Facebook and Twitter.
To address privacy concerns, WhatsApp heavily markets its encryption technology in the United States, emphasizing the protection of user data. In contrast, Meta has faced privacy controversies, such as the Cambridge Analytica scandal, which have affected its reputation.
As Meta invests in generative AI, WhatsApp could become a pivotal platform for AI-driven business interactions. Users could engage in real-time conversations for customer service or transactions with businesses. The global business messaging space, currently dominated by SMS, offers ample room for innovation and growth.
While WhatsApp’s widespread adoption is evident in many parts of the world, its path to profitability and expansion in North America remains a challenge that Meta is actively addressing. With its continued commitment to WhatsApp, Meta aims to unlock the app’s full potential and establish it as a significant contributor to the company’s bottom line.
