WhatsApp has more users than similar messaging apps, including Facebook Messenger. However, for Facebook, WhatsApp is still not a highly monetized business like its other businesses. The company expects WhatsApp to contribute to the company’s bottom line, once it touches the 1 billion-strong subscriber base.
WhatsApp added 300 million new users last year. However, the messaging service incurred a loss of $230 million in the first half of 2014. Currently, the only revenue source for WhatsApp is the 99-cent annual subscription fee after a free one-year service. So Facebook might have immense monetization opportunities from the WhatsApp business expansion.
In 2014, Facebook acquired WhatsApp. The acquisition not only expanded the company’s mobile product line-up but also added a user base, which is predominantly young. At the same time, the acquisition eliminated Facebook’s fastest growing competitor in terms of user additions, while improving its penetration in Europe, India and Latin America, where WhatsApp has a strong presence.
However, with the growing trend of mobile messaging services, WhatsApp faces stiff competition from KakaoTalk, Snapchat, Viber, LINE and WeChat. As a result, we believe that heightened competition will make it difficult for WhatsApp to restructure its business model for profits and financial viability.
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