How will Facebook turn things around to make WhatsApp worth the huge investment? We’re not sure, but if they go down the ad-route, many users will most likely walk way from the app. Let’s face it, one of WhatsApp’s most appreciated qualities was always the lack of ads and smooth, care-free experience that provided.. The news about Facebook paying a seemingly insane amount on WhatsApp ($19 billion to more exact) has come and gone, and we’re left wondering if Facebook’s investment was a good one.
Many people who own shares in Facebook are somewhat concerned, and their concerns are justified. Yes, WhatsApp has been growing consistently over the last few years, and it is indeed a very popular application. However, is WhatsApp making money?
Not so much, no. Let’s break it down! WhatsApp doesn’t use ads to generate revenue. In addition, WhatsApp is free to download and free to use for the first year, and users are only charged starting with the second year. Don’t expect WhatsApp to be costly though. The price for a yearly subscription is $0.99, which, let’s face it, is nothing people blink about. So yes, most users that download WhatsApp free and use it as such become subscribers after a year, but is that enough? Of course, 70% of users who use WhatsApp do so daily, but that doesn’t necessarily translate to huge amounts of cash. In fact, WhatsApp’s total revenues for 2013 were a little under $20 million. Note, that’s million with an ‘m’, not billion with a ‘b’, which is what Facebook paid for the app. Taking that away will likely push away many fans of the app. On the other hand, Facebook owning WhatsApp means there’s one less competitor to worry about.
In any case, it makes us wonder why Google didn’t go through with a deal with WhatsApp previously. Allegedly, Google had been in talks with WhatsApp about possibly acquiring the popular messaging app, but stepped back, not finding a suitable enough deal. Facebook’s offer was hard to refuse for WhatsApp owners, who had nothing to lose at that point, but will the app become profitable for Facebook? The possibility of a huge financial flop cannot be denied.