Mobile text empowers communication without the sender and receiver being physically within reach. On December 3, 1993, history recorded the first text sent as a short messaging service (SMS). This served as a building block for innovative instant messaging applications.
Today, mobile messaging apps allow us to share more than just block texts. People can instantly exchange images, videos, audio, and document files.This growing list of personalized communication services attracts people globally. In 2021, there were over 3 billion mobile messaging app users.
This massive customer base is a valuable avenue for advertisement. However, one platform stands out from the multi-billion dollar mobile ad empire. It’s stunning to realize that this platform doesn’t generate profit. Yet, it has scaled to be amongst the best social messaging apps. Enter: Telegram
Telegram is a freemium app that supports cloud-based and cross-platform messaging services worldwide. You may ask, “how does telegram make money to sustain its operations via a freemium platform?” Let’s dive in to find out.
What’s Telegram–A Backstory of the Multi-billion Dollar Messaging App
Telegram is a global freemium, cloud-based, and cross-platform messaging application. The story leading up to its development involves two experienced programmers: Pavel and Nikolai Durov.
The Russian brothers had executed several technical projects before the advent of Telegram. At age 11, Pavel Durov built coding games compatible with IBM PC XT. In university, they developed their first set of projects that focused on academia for the college community.
The Birth of VKontakte (VK): the Russian Model of Facebook
The next app the Durov brothers built gained more ground - Vkontakte. VKontakte (meaning “in touch”) is a social networking app that was lauched in 2006. It amassed about one million users in one year– and grew its user base by 10x in the next.
Having a clear target audience is integral to successful marketing. The platform’s primary audience included users in Russia, who made up about 80 percent of its entire user base.
Considering the age bracket, its audience falls between 25-44 years and includes active, paying users.VK’s well-defined target audience placed it as the social app with the largest top-of-mind rate in Russia. It has a 58 percent top-of-mind rate and 85 percent awareness rate.
VKontakte shares some similarities with Facebook–including its logo color and app features. Like Facebook, it has group pages, events, personal profiles, and video-viewing options. Regardless, VK stays unique concerning its advertising and marketing.
The social networking site has several advertising formats. This includes a carousel, video, story, web, and text/graphic ads. Plus, advertisers can integrate ad models like pay per click or pay per view.
The listed ad format and advertising model have assisted VKontakte in gaining significant revenue growth. From 2014-2020, VK's CAGR is +39.7 percent vs +20 percent from Russia’s digital ad economy. Note: compound annual growth rate (CAGR) helps gauge the return of an investment (individual asset or portfolio) over a certain period.
VK has experienced significant business growth (in terms of revenue and marketing success) over the years. However, the local government has forced to platform to carry out tasks to further their own agenda. For eg, the Russian government ordered the platform to terminate the account of its opposition, Alexei Navalny.
Furthermore, Ilya Sherbovich (founder of United Capital Partners) acquired a major stake in VK. This acquisition gave the Russian government more control over VK, as Ilya had connections with them. Due to this, among many other reasons, Pavel Durov left VK in 2014.
Over time, with the rising political pressure, Pavel Durov had to sell his shares and flee the country. His exit led to the inception of a new platform– that would have audiences beyond Russia and across the globe.
Telegram Messaging App
Companies promoting solid data privacy policies serve as a trustworthy platform for their users. Pavel and Nikolai Durov understood this need and set out to build a platform that supported that. In 2013, the Durov brothers co-founded Telegram–an encrypted online messaging service.
In the same year of its launch, a serious concern about data privacy and safety was raised in the US. Edward Snowden, a former NSA contractor, revealed the NSA’s unlawful data surveillance. This act came with a high cost. According to Wired, the NSA scandal did highlight two important things, among many others:
Erosion of cybersecurity. The NSA engaged in several company data collection programs, reducing trust in internet security.
Undermine internet freedom. The NSA spying endeavors broke down the existing beliefs and policies about internet freedom.
Telegram was a safe space for exchanging end-to-end encrypted messages. At the time, message encryption wasn’t available on WhatsApp–one of Telegram’s biggest competitors. We can see the impact of all this in Telegram’s success.
Let’s consider some key Telegram growth statistics, highlighting how the company has expanded its user base since its inception. (Source).
In the first year of launch, 2013: gained about 100,000 daily active users (DAUs)
Since its launch in 2013, the chat service has consistently had a growth rate of over 40 percent per year in its user base.
In 2021, Telegram had over one billion downloads. And it was the 7th most downloaded application on Android and iOS in the same year.
It has 550 million monthly active users (MAU) globally.
Here’s an overview of four Telegram core features:
Flexible account settings.
This allows users to change the registered number for an existing account to a new one. They can also add multiple profile pictures and customize chat themes.
Diverse in-app chat options.
This improves communication with pin chat. In comparison, secret and delete chat options advance user privacy. Also, users can send their location in real-time.
Seamless file transfer.
Users can send files, with 1.5 GB being the max size. Also, cloud storage allows smooth access to messages and downloaded files
Connection, security, and privacy protocols.
End-to-end encryption and Telegram’s MTProto. It also supports proxy server connections in areas where the app is restricted. 2FA is also available.
How Does Telegram Make Money: An Overview of the Platform’s Revenue Model
Telegram utilizes funding and revenue to generate cash. Concerning funding, the app has pulled huge investments from partners worldwide.
For instance, Mubadala investment company and Abu Dhabi Catalyst Partners collectively invested $150 million in exchange for five-year, pre-IPO convertible Telegram bonds.
In 2018, the message service provider branched into crypto to generate more funds. It launched an initial coin offering (ICO) for the Telegram Open Network (TON). ICO is a fundraising activity for cryptocurrency projects–making fundraising easy. However, its unregulated nature in countries like the US calls for caution.
The company successfully raised about $850 million twice, culminating in a sum of $1.7 billion. However, Telegram encountered challenges with the US Securities and Exchange Commission (SEC). The company allegedly violated the US securities law, forcing them to reach a settlement and refund its ICO investors.
Over the app’s 8+ years, Pavel Durov has injected massive funds to keep it running. In 2015, he raised $300 million by selling part of his VKontakte stakes. Plus, Pavel launched a
$1 million grant for developers to advance the Telegram bot network.
However, bootstrapping an app experiencing rapid growth doesn’t seem feasible forever. Pavel needs a channel to generate cash without exploiting users’ data for ads. He is turning to sponsored messages for this.
Sponsored messages would allow advertisers to run ads without compromising data privacy. For instance, the ads would only focus on the topics discussed in large, public, one-to-many Telegram channels.
This would prevent spam ads while preserving a satisfactory user experience. Furthermore, owners of public channels would share in the ad revenue generated from their channels.
Telegram also taps into premium subscription services as a source of revenue. The subscription services gave subscribers access to features not available in the free version. The revenue generated from here aids its continuous development.
Competitor Analysis: Telegram’s Position Amongst Other Messaging Apps
Mobile messaging apps focus on creating a seamless flow of information via text. These apps attract billions of users with their ability to chat instantly. According to Statista, about 3.09 billion users utilized the top mobile messaging apps for communication in 2021.
The same report projects this figure to reach 3.51 billion users within four years. An overview of the top messaging apps would highlight their position in the mobile messaging app industry.
WhatsApp (MAU: 2 billion)
WeChat (MAU: 1.2 billion)
Facebook Messenger (MAU: 988 million)
QQ (MAU: 574 million)
Snapchat (MAU: 557 million)
Telegram (MAU: 550 million)
Telegram ranks sixth on the list based on the monthly average users (MAU). MAU is a KPI for determining the number of users visiting a site in one month. However, it’s essential to note that other competitors actively run in-app ads except Telegram and WhatsApp. Meta (Facebook and WhatsApp parent company) support ads that lead directly to WhatsApp business lines.
On our list, Facebook alone generated $115 billion in ad revenue in 2021. In comparison, WeChat and Snapchat had $17.49 billion and $4.1 billion in the same year.
Telegram’s competitors generate massive revenues from advertising. The company also followed suit, announcing the launch of its sponsored messages in November 2021. Note: Telegram’s sponsored messages are still in test mode, and its brand’s MAU and revenue should increase once they’re in full gear.
Key Takeaway for Small Business Owners
Do you know about 90 percent of startups fail, and 10 percent do so in their first year? This is a growing concern of many startup founders and entrepreneurs. Though it involves several factors, one of them stands out: lack of cash.
Low cash inflow hinders business growth and could ultimately lead to its demise. You can avoid this with some crucial lessons from Telegram’s money-making approach. These are:
Buildd Efficient and Functional Solutions
Small business owners focus on the next-gen products that integrate the best software. This process could result in eye-catching products that have no real-world usability.
Telegram focused on end-to-end encryption. The app simplified this solution, making it fast and readily accessible. Consider simple and functional products that solve your target audience’s problem. This way helps boost sales as you’ve a real USP.
Don’t Outsource Your Core Business Competency
Outsourcing helps you focus on the “main'' goals of your business. However, limiting this to secondary activities like service or product delivery is helpful. This assists you in developing expertise in areas like business management and operation.
The said fields are critical to your business success and should not be outsourced.
Don’t Reinvent the Wheel
Pavel Durov observed existing messaging apps and found they lacked support for data privacy. He incorporated the solution into Telegram, eliminating the need for an entirely new solution.
You can buildd your business idea fast with existing solutions, deploying them to address specific problems.
Buildd MVP First
Minimum viable product (MVP) is a cost-effective way of testing market demand for your product/service. It helps you understand if potential users need your product and how it eliminates their pain points without large investments.
Launch a version of your product, gather feedback, iterate and improve it.
Address Critical Problems First
Entrepreneurs easily get the desire to develop a product that can resolve all their users’ challenges. This is not feasible, but there’s a simpler approach to addressing customer pain points.
As a startup, address your users’ most pressing needs. You can tackle the rest with a new product or by improving existing ones.
Upgrade Your Business Solutions
Your target audience’s needs are not static. You need to deliver products or services that would satisfy them as they evolve. Understanding market trends can help you identify changes in your consumer’s needs.
Also, you would be aware of new tech (if you can’t buildd one) for addressing them efficiently.
How Does Telegram Make Money FAQs
Here are four frequently asked questions (FAQs) on “how does Telegram make money”:
Is Telegram a non-profit platform?
Telegram’s main goal is not to generate profit. Rather, it focuses on enhancing data privacy and encryption. However, the platform is not built as a non-profit company. It’s registered as a limited liability company (LLC) in Dubai.
How is Telegram funded?
Thus far, Telegram has gathered funds from investors, founders, and IPOs. However, the platform plans to incorporate sponsored messages to increase revenue creation.
What country uses Telegram the most?
Telegram’s biggest audience is India, accounting for 22 percent of its total app download. In comparison, other large markets like Russia, Indonesia, and the US have 10, 8, and 2 percent app downloads–respectively.
How much is Telegram worth?
The Telegram messenger app has a market valuation of $30 billion.