WhatsApp Download

When Facebook paid $19 billion in stock and cash for WhatsApp Inc. in February 2014, many people were confused. After all, it was very hard to see exactly how the messaging service made money.

After all, Forbes estimated that WhatsApp only generated $20 million in its last year of operation as an independent company. Yet Mark Zuckerberg was willing to shell out nearly $20 billion for the company.

To make matters worse, the social messaging service famously refuses to tap one of the most popular and lucrative streams of cash online, namely advertising. WhatsApp founders Brian Acton and Jan Koum famously hate advertising and even wrote blog posts attacking the practice.
Making $700 Million $1 at a Time

Actually, the way WhatsApp makes money is fairly simple. WhatsApp generates revenue the old fashioned way, by selling a product for a low price. It employs a strategy called discounting—the same business plan that Walmart used to become the world’s largest retailer.

WhatsApp makes its money by selling its app for 99¢ to $1 a download through venues like the App Store, Google Play and the Windows Store and another $1 a year for a subscription, Investopedia reported. Since the service supposedly had around 700 million active users in April 2015, that could generate around $700 million a year in revenue.

To make even more money, WhatsApp was adding around one million users a day, which adds up to around $1 million a day in revenue.

That would add up to $365 million in additional revenue, which could bring WhatsApp revenue up to $1 billion by next year.

Data Could Be Worth More Than Money
Now for the truly interesting part: The real value in WhatsApp is in the behavioral data that it collects about its users. Since WhatsApp users send an estimated 30 billion messages a day, there’s a lot of data to sift through.

The data could help Facebook analyze all the connections that users have and how they share data, analyst Mark Little told Forbes. Such analysis could give Facebook indication of what sort of products users might be interested in so it could tailor ads specifically designed to appeal to them. For example, users that send a lot of messages from McDonald’s might start seeing advertisements for hamburgers when they log on to Facebook.

All the additional WhatsApp users also increase the number of potential viewers for advertising sold through Facebook. More sharing also creates more opportunities for advertising, which means more potential revenue for Facebook.

A potential use for WhatsApp by Facebook is value creation, Little said. In that scenario, WhatsApp creates more value or opportunity for advertising. Facebook itself will package and host the advertising and sell it.

Are WhatsApp Users Now for Sale?
There’s also a strong possibility that Facebook could simply sell the data to others such as Google. Even limited data about individuals’ social media habits could potentially be worth a vast amount of money.
For example, a person that downloaded WhatsApp would presumably be willing to pay for more apps. Therefore other app developers would be willing to buy that information and try to advertise to those individuals.
A person that purchased and regularly uses WhatsApp would also be more likely to utilize other app-based products and services such as Uber. That means companies like Uber could pay Facebook for the opportunity to put their services and products before WhatsApp users.

There are other kinds of marketing available too. A person that sends a lot of photographs over WhatsApp might presumably be interested in a new kind of camera phone. Somebody that sends YouTube videos to his friends might be interested in a streaming video subscription.

Doubling the Size of Facebook
Purchasing WhatsApp also allowed Mark Zuckerberg to effectively double the size of his social network. In December 2014 Facebook had 1.39 billion users, Investopedia writer Alison L. Deutsch noted. At the same time, WhatsApp reportedly had around 700 million users and was adding another one million a day, meaning it was on track to have a billion users.

By increasing the size of Facebook’s user base to two billion, Zuckerberg could greatly increase the amounts he charges for advertising. More importantly, Facebook could attract larger advertisers with deeper pockets, such as auto and technology companies, retailers and manufacturers of food products.

WhatsApp also has large numbers of users in larger, growing markets that Facebook has not been able to penetrate. This includes developing countries where most people rely on smartphones rather than computers to connect to the Internet. Facebook, which is a computer-based service, has had a hard time penetrating the developing markets.

There are some lucrative industries targeting the developing world, including peer-to-peer lenders like Lending Club and the massive payment services provider PayPal. PayPal just went public via an IPO and now owns the popular payment solution app Venmo, which allows people to send money via social messaging; Market Madhouse reported that Venmo users sent $700 million to each other in July, August and September of 2014.

One potential product that could be sold through WhatsApp or with WhatsApp would be a payment solution product similar to Venmo or Apple Pay. That would enable WhatsApp users to send money to each other, to receive money, and to pay bills. It might also enable people to lend money to each other on a peer-to-peer basis.
Owning WhatsApp could also help Facebook connect with younger people, who are less likely to utilize a computer-based service. It helps the company deal with the phenomenon of Facebook’s “death to teens” which was widely reported last year.

Growth Now Monetization Later
WhatsApp is also clearly a very good fit with Facebook’s classic business model, which is growth now and monetization later. Facebook first expands its services and capabilities; then it figures out how to make money from them.

For example, the social network and the ever popular Facebook pages were up and running for years before Facebook was able to start generating revenue from them via advertising. New streams of revenue from products like payment solutions might not be available for years.
That means WhatsApp does not necessarily need to be making money to be valuable to Facebook. The vast numbers of users it has attracted could be the real value to this company.

How Was WhatsApp Created?
WhatsApp is not just one of the world’s most popular and successful messaging apps. It is also a very inspiring rags to riches story with some very humble beginnings.
The app’s beginning can be traced to January 2009, when a former Yahoo engineer named Jan Koum bought his first iPhone and started playing around with the App Store, Forbes reported. As he looked at the iPhone, Koum realized that apps would become a major new industry and a revenue generator.

The men behind WhatsApp, Jan Koum & Brian Acton, courtesy Forbes

Koum eventually started discussing an idea for an app over tea with his friend Alex Fishman in the kitchen in West San Jose, California. The idea Koum had for a new app was a very simple one—an address book that would show a person’s status to the members of his or her social media network.
Koum then spent several weeks creating the backend code for the App and named it WhatsApp, a phrase that sounds similar to a popular American slang term—What’s up. Interestingly enough, the first action Koum took with the app was to create a company called WhatsApp Inc. and incorporate it.

Started in a Restaurant
Over the next few weeks Koum began improving and testing WhatsApp by letting his friends use it. As he worked on the project, Koum realized that he was creating more than an address book; he was building an instant messaging service. In February 2009 Koum released WhatsApp 2.0, the world’s second free texting service on the App Store, and soon had 250,000 users.

To help him build WhatsApp, Koum enlisted the aid of his old friend and former boss, Brian Acton. The two started hanging out at the Red Rock Café, a popular restaurant in Mountain View, California, and working on WhatsApp. With $250,000 they borrowed from friends, the two started hiring employees. They leased space in an old warehouse and started updating their creation.

WhatsApp was unique and popular because it was the first service that offered free international messaging. It also used a person’s phone number as a login, which made it very easy to use, unlike some other products on the market in those days.

In December 2009 they had their first hit with a version of WhatsApp that could send photos that they began selling through the iPhone for $1. By 2011 they had one of the top 20 apps in the U.S. App Store, and by 2013 WhatsApp had 200 million users worldwide.

From Food Stamps to Facebook
WhatsApp hit the big time in February 2014 when it was announced that Koum and Acton were selling the company to Facebook for $19 billion in cash and stock. By then, WhatsApp had 450,000 users all over the world.

When they signed the Facebook deal, Koum insisted on holding the ceremony outside an abandoned social services office near WhatsApp headquarters. It was the same building where the Koum and his mother had once stood in line to receive food stamps, welfare payments for families too poor to buy food.

Koum had come full circle from his childhood in a village outside Kiev, Ukraine, that had no electricity.

Koum moved to the United States when he was 16 and swept floors at a grocery store to help pay the bills. By the time he was 18, Koum had taught himself computer networking by reading manuals he bought from a used book store.

He met Brian Acton while working as an infrastructure engineer at Yahoo. The coworkers became friends and shared many traits, including a hatred of advertising, which was ironic because the two helped develop Yahoo’s advertising platform in 2006.

The Facebook deal brought the two full circle in another way because in 2009 both had been turned down for jobs at the social network. Koum had also been rejected for a position at the world’s most famous texting service, Twitter. Instead, they made WhatsApp into a company and paid the bills by selling apps on Facebook.

It Did Not Make Money
The most fascinating aspect of the WhatsApp story is that the company did not make a lot of money until quite recently. When Facebook bought the service in 2014, it was generating tens of millions of dollars in revenue from app sales, according to Business Insider, which is nothing for a Silicon Valley company.

Koum and Acton could have made far more money if they had simply added advertisements to their app, but they hated advertising. They also rejected outside investment and went out of their way to keep costs low. Forbes reported that the company’s first office was in a building so cold the founders had to cover themselves with blankets.

WhatsApp saved money by having all its development done in Russia, where labor costs for web design and app creation are far lower. In 2014, at the time of its acquisition by Facebook, WhatsApp only employed 50 people. By then the company was extremely profitable because of the advent of Google Android.
Interestingly enough, many Silicon Valley insiders had predicted that WhatsApp would fail because it did not take any advertising. The experts were skeptical about the potential of an app-based company.

Acton and Koum’s success proved them wrong; Forbes estimated that each of them took home around $6.8 billion after the Facebook deal. It is not clear what they will do next, but we probably have not heard the last of the two men behind WhatsApp.

Although, Time reported that Koum wants to make WhatsApp faster and more stable with the Facebook money. News stories indicate that WhatsApp will continue to be ad free and that Koum will focus on growing the company rather than monetizing it.

Interestingly, Koum and Facebook’s founder and CEO Mark Zuckerberg have been friends for many years. Zuckerberg was so impressed with WhatsApp that he spent two years trying to buy the company, often raising the possibility with Koum when the two went walking and hiking together.
Despite its humble origins, WhatsApp has proven that something very simple can change the world. The success of WhatsApp proves that apps are big business and that they are here to stay.