Messaging apps, including WhatsApp, are primarily free to use, which raises the question: how do these platforms make money? With nearly three billion users globally, the operational costs associated with running such a large-scale service are significant, yet users do not pay to access basic functionalities.

WhatsApp, owned by Meta, monetizes through corporate customers rather than individual users. Businesses can create channels to send messages to users who opt to subscribe, providing a means for companies to engage with potential customers. However, the primary revenue source comes from businesses paying for direct interactions with individual customers through the app. This feature enables firms to conduct both conversational and transactional activities.

For instance, in cities like Bangalore, users can purchase bus tickets and select seats directly through WhatsApp, demonstrating the platform’s capability to facilitate complex transactions within chat threads. Nikila Srinivasan, Vice President of Business Messaging at Meta, states, “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.” This model allows users to book tickets or initiate returns without leaving their chat, providing convenience that enhances user engagement.

Furthermore, businesses can pay for links that initiate WhatsApp chats directly from online ads on Facebook or Instagram, contributing significantly to Meta’s revenue. Srinivasan notes that this single revenue stream is now worth “several billions of dollars” to the company.

Other messaging apps employ different monetization strategies. Signal, known for its security features, operates as a non-profit organization. It relies on donations, including a significant $50 million contribution from Brian Acton, a WhatsApp co-founder, in 2018. Signal’s goal is to become increasingly funded by small donations, aiming for financial independence without relying on investors.

Discord, popular among gamers, uses a freemium model, offering a free basic service alongside paid features. Users can subscribe to Nitro for $9.99 per month to access enhanced functionalities, including high-quality video streaming and custom emojis. This model blends free access with optional premium services.

Snap Inc., the parent company of Snapchat, combines several revenue-generating strategies. It carries advertisements, boasts 11 million paying subscribers as of August 2024, and sells augmented reality glasses. Notably, Snap has generated nearly $300 million from interest between 2016 and 2023, but its primary income stems from advertising, which exceeds $4 billion annually.

In the UK, Element charges governments and large organizations for its secure messaging service, allowing clients to use its technology on their private servers. The co-founder, Matthew Hodgson, states that the firm is nearing profitability and generates “double-digit million revenue.”

Hodgson emphasizes that advertising remains a predominant model among messaging apps. Many platforms track user behavior to sell targeted ads based on collected data, even when content remains encrypted. This practice highlights the age-old adage: if users are not paying for a service, they may very well be the product, as their information is utilized for monetization.

In summary, messaging apps like WhatsApp employ diverse strategies to generate revenue while maintaining a free-to-use model for individual users. By tapping into corporate communications, leveraging advertising, and incorporating premium features, these platforms sustain their operational costs and profitability in an increasingly competitive digital landscape.

(Adapted from BBC.com)