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WhatsApp users were previously required to pay a yearly subscription fee of $0.99 after the first year of free use. However, the popular messaging app found that many of its ~1 billion users didn’t have debit or credit cards, complicating the company’s ability to generate revenue from the model and also deterring consumers who were unable to pay the subscription fee.
WhatsApp’s move away from its subscription model to a B2C platform makes sense for a number of reasons, as we recently explored in our Messaging App report. Here are the top reasons:
- Creating an avenue between consumers and businesses is a compromise between the values of WhatsApp and its financial interests. Although one of the platform’s founding principles was that it would never advertise on its platform, Facebook made clear it would look to monetize the platform after it reached the 1 billion monthly active user (MAU) mark. Providing a service for its users while generating revenue is profitable and promotes a good user experience.
- The app-within-an-app system is proven to work. Under the subscription model, WhatsApp’s average revenue per user (ARPU) was just $0.06, which adds up to around $54 million per year. The app-within-an-app model, as demonstrated by WeChat, is much more lucrative. WeChat’s ARPU is estimated to be around $7, and although it’s unlikely WhatsApp’s offerings will ever become as robust as WeChat’s, the platform is likely to significantly increase its ARPU through this model.
- Although there won’t be any third-party ads on the platform, there will be plenty of marketing opportunities for partnered businesses. Chat apps boast a number of distinct characteristics that make their audiences appealing to businesses, including size and user demographics. Messaging apps are also used more frequently than other apps, giving business partners more opportunity to engage with consumers. They are opened nearly nine times per day on average, while all other apps average just two daily opens, according to Flurry Analytics.
It’s worth noting that Messenger, which is also owned by Facebook, has been building out its platform with B2C communications as just one feature of many. It’s likely that Facebook will continue to develop the app-within-app offerings of Messenger in order to mimic WeChat’s success.
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