How Facebook can monetize its new acquisition

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Just a couple of days ago the news came that WhatsApp has been sold to Facebook for a whopping 19 billion dollars. For the past 5 years WhatsApp has been only growing tremendously. There are more than a billion active users who use the application every day. If we look at the history, we used to text each other using the SMS, while today we text each other on WhatsApp. The way we communicate changed completely because of WhatsApp. The vast subscriber base has been the major attraction for the social media giant, Facebook.

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Last year, Facebook tried to buy SnapChat, but it did not. Its unfulfilled wishes to buy something new persisted. Right now it is very unclear how Facebook intends to use this newly acquired startup to gain profits from it. There have been many speculations on the way Facebook would monetize this acquisition.

WhatsApp was built on the fact that it should be one good messaging application with no ads and gimmicks. Their earnings were simply generated through the one year subscription plan worth 99 cents. After the acquisition by Facebook, would the monetization system remain the same is the question. Facebook generates its revenue from a completely different model which is based on advertisements, while the revenue model of WhatsApp is worlds apart. It would be very disturbing to see advertisements in an application which was built on the principle of “no ads”.

There are no official words on the revenue model, but this is what we think would be implemented by Facebook in their new acquisition.

Subscriptions: It is possible that there would be no change in the revenue model and Facebook would continue the way it is. It is also possible that they could increase the amount by a factor. Right now, there are ~1 billion users. That could equal to around 1 billion dollars in generated revenue per year. By increasing the revenue by a small factor could make a significant difference. They can also start showing ads in our messages which could be removed by paying a small fee. Another idea comes to my mind, is reducing the subscription fee and displaying in text ads in our messages.

Additional benefits: WhatsApp lacks a lot of important tools that are present in a modern messaging app for desktop. Encryption, file transfer, file storage similar to that of Facebook are not present. By paying a small fee to unlock these features would help them gain their profits and revenue. Such a model has already been used by Facebook to sell special emoticons and they seem to have done pretty well with it.

It would be an interesting story to follow up and see how Facebook makes good use of its investment. Whatever it be, Facebook now has a huge database of verified phone numbers active on WhatsApp and not all among them are registered on Facebook. So, we can see Facebook reaching out its arm to get people involved with them at any cost.

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