WhatsApp for Business: Meta’s Cash Cow or Dead Wood?

WhatsApp has 2 billion monthly active users, but it's a completely free app. So, how does Meta make money from it? Well, the answer is Whatsapp for Business. Let's find out all about it!

10th August 2022
5 min read

In a nutshell

WhatsApp is wildly popular, especially in India. 20% of their 2 billion monthly active users are from India!

But, had WhatsApp made any money from Meta? More importantly, does Meta even have a plan to buildd a successful business out of WhatsApp?

Before WhatsApp was acquired by Facebook (now Meta) in 2016, here's how they were planning to make money:
- WhatsApp is completely free to use for a year
- After that, users have to pay a $1 fee every year to continue using the app.

When Zuck came in, he completely trashed the $1 fee plan, and instead choose to make money through another app called WhatsApp for Business.

With WhatsApp for Business, businesses can reach customers with promotional messages, customer services, etc directly on WhatsApp.

But, how much money can Meta make from this line of business?
Well, WhatsApp charges businesses based on the number of messages sent. As the messages increase, the price per message decreases.

From the lowest slab of $0.0085 per message for the first 250,000 messages, WhatsApp makes $2,125!

If we consider 1 business, all 6 slabs & 20 million messages, WhatsApp for Business makes $130,250 in revenue!

Now, if we consider all businesses in India, by taking a few assumptions, WhatsApp can conservatively make ~$9 billion in revenue!

Whatsapp has changed the way we communicate! Pictures, videos, and even voice messages have taken it beyond being a simple messaging app.

And it’s wildly popular, especially in India. WhatsApp has 2 billion monthly active users (as of 2022)[1] and 20% of those users are from India.

But has WhatsApp made any money for Meta? More importantly, does Meta even have a plan to buildd a successful business out of WhatsApp?

Well, the answer to the latter question is a strong yes. But Meta’s plan to make money from WhatsApp is a line of business you’d have possibly not heard of — WhatsApp for Business i.e. making money from other businesses.

So, in this article, we’ll dig deep to understand WhatsApp for Business and how it will make money for Meta.

WhatsApp’s first business model

WhatsApp was founded as a messaging app in 2009. By 2013, WhatsApp had already become very popular with 200 million+ annual users across the world.

Till then, WhatsApp was entirely free to use. Now, the founders chose the most obvious way of making money from WhatsApp.

They allowed users to use the app for free for a year. After which, the users would be charged a tiny fee of $1 every year to continue using the app.

Now, at its peak (2016), WhatsApp touched 1 billion annual users[2]. This would mean they could make $1 billion in revenue through this subscription model!

Of course, a huge number of users would have possibly shifted to a free alternative like Telegram and the actual revenue would have been much lesser.

In reality though, this is what happened. Meta (or Facebook, back then) acquired WhatsApp in 2014 and in 2016, they announced that the $1 fee was permanently removed[3].

Facebook said that it wanted to generate revenue from WhatsApp in a more “meaningful” way in the future.

<%= render_dynamic_cta(image: 'https://buildd.s3.amazonaws.com/app-ctas/app-download-article-1.png', url: 'https://app.buildd.co/inarticle-a') %>

Making money from businesses: The more “meaningful” way

Traditionally, businesses have communicated with their potential and existing customers using telephone calls, emails, and text messages.

Enter WhatsApp with its reach of 2 billion users, and ease of use. Imagine if these businesses start using WhatsApp to communicate with their customers.

Businesses would reach users on their preferred channel where people spend most of their time. Plus, the conversations don’t have to be text-only, and these parties can easily exchange pictures & videos making the conversation more engaging.

In the same announcement of 2016, Facebook also said that it plans to buildd tools that allow people to communicate with businesses & organizations via WhatsApp. For instance, talking to your bank about a suspicious transaction or checking the status of your flight with the airline[4].

But how much money can WhatsApp make from businesses?

It all comes down to numbers now! Is WhatsApp’s business offering lucrative enough for Meta?

Revenue from a single business in the lowest slab

Now, WhatsApp charges businesses based on the number of messages sent. As the number of messages increases, the price per message goes down.

In the lowest slab, you’re charged $0.0085 per message for the first 250,000 messages sent and these are all the pricing slabs.

whatsapp for business table 1 - Pricing slabs

So if a business signs up at the most basic slab and sends all messages allowed, this is the revenue it brings to Meta:

  1. Revenue per message ⇒ $0.0085
  2. No. of messages ⇒ 250,000
  3. Total revenue ⇒ 250,000 x $0.0085 ⇒ $2,125

Revenue from a single business across all tiers

Now, let’s look at the revenue generated by WhatsApp from a single business in all of the six slabs.

To keep things simple, we’re assuming that all messages in each of the slabs are utilized entirely by the business. For Slab 6, we’ve assumed an average of additional 10 million messages sent beyond the first 10 million messages.

whatsapp for business table 2 - Revenue per business in each slab

Revenue from all businesses

Finally, let’s look at the total revenue WhatsApp could potentially generate across all businesses in India.

  1. There are 1.43 million businesses registered in India under the Ministry of Corporate Affairs[5].
  2. Let’s say 35% of these registered businesses eventually end up opting for WhatsApp for Business. That comes to 35% x 1,430,000 = ~500,000 businesses.
  3. We have split these 500,000 businesses across the various pricing slabs, keeping just 1% i.e. ~14,000 businesses in the highest slab.
  4. whatsapp for business table 3 - Number of businesses in each slab
  5. Finally, we merge table 2 (revenue per business in each slab) and table 3 (number of businesses in each slab) to arrive at the total potential revenue for WhatsApp.
  6. whatsapp for business table 4 - Potential revenue

So, WhatsApp for Business stands to make ~$9 billion in revenue, just from India!

Of course, onboarding 500,000 businesses isn’t as easy as it sounds and may take a lot of effort and time. But what if Meta were to focus their energies on clients in the highest slab i.e. slab 6?

Targeting big businesses for more money!

Meta is already in talks with several large companies over the last few years, many of which are testing the features[6] of Whatsapp for Business. Some of these big names are Netflix, Uber, Hilton, Home Depot, Four Seasons etc. 

The story in India is quite similar. Consider the case of Bharat Petroleum Corporation Limited (BPCL), for instance. BPCL is an oil and gas company, owned by the government. 

85 million users reach out to BPCL via calls & text messages. In a year, BPCL broadcasts 700 million promotional messages![8]

Now, WhatsApp is already working to get BPCL onboard. But how much money can a single client like BPCL bring in?

Revenue from BPCL

  1. BPCL broadcasts ~700 million promotional messages every year.
  2. Assuming the best pricing of $0.0058 per message (slab 6),Revenue = 700 million x $0.0058 = ~$4.1 million.
  3. On top of this, users can also initiate conversations with BPCL. Such conversations are charged at a lower rate of $0.004 per message[7].
  4. Currently, 100,000 customers use BPCL’s WhatsApp bot daily. That’s 100,000 / 85,000,000 * 100 = 0.12% of its user base.
  5. BPCL is still in the early stages of WhatsApp adoption and developing its bot. Let’s say this number goes up to 1% eventually.So, number of users for BPCL’s WhatsApp bot daily = 1% x 850,000,000 = 850,000.
  6. Daily revenue from the bot = 850,000 x $0.004 = $3400.So, yearly revenue = $3400 * 365 = ~$1.3 million
  7. Total revenue WhatsApp makes from BPCL = $4.1 million + $1.3 million = $5.4 million!

Interestingly, WhatsApp already makes ~$4 million in revenue from CRED[8], which is one of the highest spenders on WhatsApp for Business in India.

<%= render_dynamic_cta(image: 'https://buildd.s3.amazonaws.com/app-ctas/app-download-article-2.png', url: 'https://app.buildd.co/inarticle-b') %>

But what is WhatsApp doing to acquire these businesses?

Now, WhatsApp’s proposition is already quite solid. They have built a wildly popular channel, that people are addicted to. On top of that, they also offer features like sharing pictures, audio & video files vs. your traditional text messaging.

But Zuckerberg is not the one who will wait for customers to come in organically. WhatsApp already has a yearly promotional budget of ~$30 million to grow the business.

A part of this budget is given to businesses as a fund to buildd & improve their WhatsApp bot and processes. For instance, BPCL has already received INR 1 crore from this fund![8]

Closing thoughts

Clearly, the numbers indicate that WhatsApp for Business can be a money spinner for Meta!

For businesses around the world, it will open new avenues of communication and direct reach to customers in an engaging way.

Meta clearly has a secret weapon in its arsenal. But how effective it turns out will depend on how well Meta executes its plan.

From how we’ve seen Zuck & Meta operate over the years, huge business success seems a likely scenario 😉


You'll love these articles too!
Facebook loses 250 billion in a single day!
Facebook loses 250 billion in a single day!
HDFC journey to becoming India's most profitable bank!
HDFC journey to becoming India's most profitable bank!
Jockey's GENIUS marketing strategy to create an underwear brand
Jockey's GENIUS marketing strategy to create an underwear brand

Facebook loses 250 billion in a single day!

Last week, Facebook's parent company Meta lost $250B in a single day. Consequently, Meta's shares dropped by 26% & Zuckerberg's net worth fell by $31B.

Over the years, Facebook has always seen steady growth in the number of users. Until the 4th quarter of 2021, when its daily global users fell by 1M. In the bigger scheme of things, that's just a 0.05% drop for Facebook, so why fuss about it?

Well, this drop could probably mean a beginning to continuous decline for Facebook OR it could just be a regular up & down all companies witness.

Now, one reason behind these events could be Apple's new privacy policy. According to the new policy, users have to opt in to getting tracked on their phones. Of course, over 60% of users opted out. As Facebook relies on Ad money, this was a major hit. They lost $10bn in 2021 because of the policy alone.

Additionally, apps like TikTok & YouTube are growing each day to challenge Facebook's once help lead in the social media. Even advertisers have more options to air their advertisements.

With growing competition & Apple's privacy policy, it'll be interesting to see how Facebook tackled these issues. But for now, they have placed their bets on the Metaverse.

Metaverse is a high-risk high-reward scheme and the only other major tech company operating in this space is Microsoft.

Facebook lost over $10 billion on this last year, but it's all insignificant if Facebook's bet plays out well. Of course, only time will tell if the Metaverse becomes a reality and who wins the race. For now, though, Facebook has a bumpy ride ahead.

HDFC journey to becoming India's most profitable bank!

HDFC was born in the aftermath of the economic liberalization of India in 1991. India, was suffering through an economic crisis at that time and the government had set forth a stream of reforms, with an "inclination to privatization' as the core theme.

As part of the reform, RBI was looking into licensing more private banks in the hope of introducing more healthy competition in the sector and squashing the lazy banking phenomenon.

After hearing this news, Deepak Parekh, chairman of housing finance giant, HDFC, was very intrigued. He set out to buildd his own bank and he immediately convinced Aditya Puri, to leave his Citi Bank CEO position, to run the very new HDFC Bank.

With a dream team of seasonal bankers onboarded, HDFC was ready to set sail in 1994. But, instead of building a nationwide branch network that would rival SBI's network, HDFC started small.

Now, Aditya Puri's vision for HDFC was very clear. He wanted to combine the diverse product lineup of foreign banks and branch networks of PSUs to buildd a bank that does both.

It first targeted the blue-chip corporate lending sector, which was a low-cost but super competitive space. So, HDFC's team used their networks to connect to these blue chip companies and created custom products for their specific needs. They first bagged a contract with Siemens, and then Ambani, Tata, and Birla followed.

They further transformed the entire cheque settlement process for cooperative banks and created a more efficient system for stock trading settlement.

Till this point, HDFC was doing very well, but there is only so much money a bank can make while lending to only the creamy-layer blue chip companies. So, HDFC finally decided to focus on the retail sector.

But, they approached the move with a sense of caution and rapid experimentation. Before rolling out a new product, say car loans, HDFC would run a pilot to check the intricacies of each space and understand the risk involved. Only if things went well, they would move on to a rapid rollout.

To sum it up, while HDFC's core strength lies in its brilliant execution, the bank is very much known for its super crisp balance sheet and very low default rates. And, that's all thanks to it's incredible risk management strategy.

But, even at its height, HDFC shows no sign of stopping. Aditya Puri was of the firm belief that all companies run out of leverage gained from their past innovations within 3-4 years as the market catches up. With this attitude, we can surely expect BIG things for HDFC!

Jockey's GENIUS marketing strategy to create an underwear brand

Before the 1990s, underwear shopping was a hush-hush affair. The shopkeeper would hand you any random product and you simply had to trust their judgement. Moreover, underwear was a strictly functional commodity and no one remotely imagined making a fashionable brand out of it.

Enter Jockey! Founded in 1876, Jockey was wildly popular in the US for its shorts, with a Y-shaped fly.

Jockey's first attempt to enter India was through a partnership with Associated Apparels in 1962. But, it didn't go well.

Jockey only got a fraction of attention from them and in 1973, when the Indian government forced foreign companies to dilute their stake to 40% or less, Jockey left the country!

In 1991, Jockey re-entered the Indian market with their trusted partner, the Genome family, and this time they got their undivided attention.

And finally, the Genomal family had shown that they were ready to experiment & make bold moves. This was particularly critical for Jockey, given their ambitious vision of creating an aspirational underwear brand.

But, how did Jockey go from a newbie to a 50% market share in India. Well, Jockey's parent company, Page Industries, made bold moved in 4 key areas that changed the game entirely.

A) Product
1) In-house manufacturing =>Unlike Rupa and Lux, Page Industries were particular about having control over manufacturing and product quality.
2) Obsessed over quality => Page Industries placed an almost obsessive focus on product quality right from the start.
3) New products & variants => Page has constantly launched new products & variants at a rapid pace

B) Place
1) In-store advertising => Page laid excessive focus on in-store advertising, and ensured that Jockey got the bulk of the in-store promotional space.
2) Exclusive brand distributors => Jockey partnered exclusively with brand distributors who work with and push only a single brand at the stores.
3) Exclusive brand outlets => Page Industries has ~1000 exclusive Jockey outlets across India

C) Promotional or Messaging
In India, Western means Aspirational! Page played very well on this sentiment and ensured that people perceived Jockey as a premium, foreign brand.

The advertisements, posters, models, and every aspect of the brand was loudly western. In fact, they hired caucasian models for all their ads!

D) Pricing
1) Premium Pricing => The premium messaging that Page desired for Jockey, had to be reflected in the pricing as well. So, Page consciously priced their products in the sub-premium to premium range.
2) No discount policy => Additionally, Page also avoided offering any discounts on its products.

But, did this strategy really work? Well, of course it did!
1. In 2000, Rupa made a revenue of INR 100 Cr, while Jockey was at INR 21 Cr.
Fast forward to 2022, Jockey at ~INR 3725 Cr now makes 2.5x the revenue of Rupa (~INR 1474 Cr)!
2. Jockey is also completely debt-free, and has a healthy ROCE of ~64%, which is 2.2x that of Rupa (~28%).