Monetizing WhatsApp - The World Most Valuable Personal Social Media Platform

disclaimer: I am not associated with WhatsApp and Meta - currently and in the past. These are my personal views based on publicly available data points and news articles. This is purely a strategic thought article, and is not an indication of my alliance to any theory. I personally use WhatsApp regularly.

This topic recently came up on a closed group WhatsApp (WA) community. Rather the discussion was around several flaws in features like WA Community. There was also feedback that while WA managed to stay clean, new features since its acquisition has lost the ethos of the platform. So why is Meta not monetizing WA, a platform used by over 3 billion monthly active users (MAU), a killer app by any standard with $0 spent on user acquisition (CAC)?

Background

Most startups struggle with user acquisition, even paid ones. WhatsApp, on the other hand, had the best organic growth, only exceeded by OpenAI recently. It appealed to everyone, setup was quick (you just needed a valid phone number) and you are ON! Other platforms have come up since like Telegram where you don't even share your phone number (for privacy reasons). But it seems like majority of users globally don't care, reflective in the growth of the platform. As a business user, you would most likely share your business card which has your direct number, and you can get started. With family & friends it is even easy - who is a family or friend if I don't have their contact details :)

Facts:

• Meta, erstwhile Facebook - the owner, has been riddled with privacy / data concerns including the Cambridge Analytics fiasco.
• Facebook has also been under lens on forcing user engagement through infinite scrolls/feeds
• Meta tried $1/user fee for WA, but there was a severe backlash from countries like India where it is most used (over 500 million users & counting)
• Running Ads would clutter the experience, and potentially move users to competing platforms (who may be on "acquiring users" phase, and not concerned about revenue)
• WA is used even by public servants and any evident data leak could cause severe damage to its reputation, not withstanding, legislations to curtail the platform

Is there a business model to achieve breakeven (if not profitability)?

• Advertisement

Ads have been ruled out as it would ruin the user experience. Most users would immediately switch to another platform to stop being pestered with ads. Also successful ads business would indicate private data being used for targeting. This would trigger users moving out the platform in hordes. What is a social platform if not for its users.

So while no change in status would possibly prevent new user acquisition, a change not accepted would lead to loss of users. Meta may not have a sure shot way of acquiring new users in the same way the original WA founders managed to.

Insight: Users are fickle minded and lazy.

• Subscription fee

A subscription fee of $1 or so was circulated around 2016 and it met with a huge backlash. Many switched to other platforms, and new platforms started coming up on a future of a profitable social media platform installed on (almost) every device on this planet. While users in countries with high per-capita income would be open to being charged to preserve their privacy (data), WA would lose users in low income countries.

To justify paying in some countries and FREE in the rest of the world (RoW) would mean that Meta has to showcase some value. If that value is data privacy (since Ads as an option was ruled out for UX), the repercussions would be far greater than the billion $ annual revenue! While this was the earliest attempt to monetize WA, Meta stopped this in 2016.

Insight: FREEMIUM model on WhatsApp is yet to be explored.

• Value Addition: Business Communication using API

Access to APIs to send bulk communication seems to be the closed option to running Ads. It is the most direct form of communication today and that can also be personalised per-user. No pesky ads, no money paid, the only discomfort is few pesky spam messages in your WA inbox. But then we are used to it with free email platforms. Very little is lost.

This strategy of Meta seems to be going well.

Insight: Using B2B2C is the best way to monetize a social media platform.

Is this the only revenue option for WhatsApp?

Facebook, which many hate and has been subjected to several legal battles around the world, does $5.52 ARPU (and $68.44 in US and Canada). WhatsApp, which there is very little public hate, with user around 2.5 billion (based on the chart below) manages a meagre 0.5 billion in revenue. That is around $0.2 ARPU.

This is obviously a lost opportunity to monetize the most popular today. X/Twitter has ~ 300+ million MAU (source) with a revenue of over $4 billion annually (in 2022, https://www.searchlogistics.com/learn/statistics/twitter-user-statistics/). That is over $10 ARPU.

Any other option?

STRONG DISCLAIMER: This piece is purely speculative without facts. It is merely a reflection of what I would do if I were to maximise the APRU that a platform like WhatsApp demands.

In a P&L statement in accounting, revenue can be attributed to multiple source - revenue from core business, and revenue from other sources (like interest income, sale of land/machinery, etc.). Does Meta have an indirect way to generate revenue?

Desktop Apps for WA

For a platform that is barely generating revenue (in contrast to its potential), Meta seems to be investing continuously in evolving the platform like its investment in Desktop Apps. This is counter-intuitive for a strategic business decision by any standard.

WhatsApp being app-less (or OPA) on desktop platform was great to improve communication across devices. It though has its share of challenges, namely dependency on the browser. Depending on the browser and its philosophy, running WA on a browser would either impede its data collection capability and/or provide access to same data to the browser platform, ridding itself of any competitive advantage.

Most modern devices come with an array of sensors and while browsers have been improving their access to sensor data, Meta' dependency on the browser which prompts the user to allow access to sensors (like "Allow access to Camera") would potentially ward off users sharing access. A native app on the other hand would potentially request this once and most users would forget about these permissions (remember that users are lazy).

Build a new OS and device for enhanced user experience (and exclusive data intelligence)

Also while apps would allow access to sensors, Apple (and Google recently) have been removing those permissions or re-prompting users for permissions (to force lazy users to evaluate their options). This does not bore well with data collection strategy. We also know the Apple vs Meta public spat few years ago where Apple prevented FB from requesting certain permissions.

Why not build your own device with its own OS? No more being at the mercy of others. Well, Meta certainly tried that with its MetaVerse effort - a OS (veiled as a platform) running atop a purpose-built device. This was as close as they would get building a mobile device without competing heads-on with Microsoft, Apple and Google. This was done on the back of Web3.0 strategy which meant to give freedom of choice to users with their data, an anti-thesis to what Meta is known for. Billions of dollars poured in building and marketing the effort, didn't do the trick.

Since Jan/2023 everyone has been hyped about AI, specifically GenAI. OpenAI became the fastest growing app on the planet till date. Users (and even companies) were leveraging GenAI platforms to do many things, and more importantly, personal data privacy was not even being questioned in the early days. Google was deemed to be losing its most valuable asset - search and associated Ad revenue.

So if Meta can monetize Ads on Facebook and Instagram, can it connect the users across these platform (with different visible personas) and understand more of about the user? If so, it can serve better Ads on FB and Insta and still stay out of trouble. At a group level, it can collective generate revenue that would subsume any loss WhatsApp.

AI (mores specifically GenAI) to the rescue

Meta introduced "Meta AI" and makes its model public. It is competitive to ChatGPT and yet free. This is the best publicity and do-gooder which is otherwise what Meta is not known for. It has never seen a better brand image in its history.

Meta introduces "Meta AI" to WhatsApp. As an open-source model, it can allow users to leverage its capability for communication, summarization and more. Most importantly, it will need access to your WhatsApp data to make this happen.

This is understood by everyone that personal data has to be shared for personalised recommendation. There are no two-thoughts about this. Meta can now pull your personalised data to make the models better (though end-end communication is encrypted on WA), but also use it to improve other parts of its ecosystem, namely Ads (and maybe others).

Closing thoughts

WhatsApp is the most useful platform today to have boundary-less communication. As with any business, it needs to be profitable to make business sense.

I commend Mark Zuckerberg will and persistence to keep finding avenues to monetize the platform. Being famous has its downside and WhatsApp is as famous as any app can be, and hence closely monitored. Finding opportunities to monetize without degrading user experience (UX), managing privacy and still generating revenue is a difficult ballgame. Meta seems to be treading on a thin-line with WhatsApp by doing what-is-right-for-business to what-is-right-for-users. As noted above, data / insights from WA/Meta AI could be its next trillion dollar opportunity without doing anything different from any other AI platform. So it is as good as the next platform offering generative-AI (GenAI) services, other than the fact that MetaAI is also open-source. What more can one do?

What are your thoughts on generating more revenue from WhatsApp beyond those discussed here? Share in comments.