Exam Number: B172600

How does WhatsApp make money if its service is free

for most users?

Author: Boris Miranda

Date of publication: 3rd of March 2021

Media outlet: BBC

Links: https://digismak.com/how-does-whatsapp-make-money-if-its-service-is-free-for-
most-users/

https://www.bbc.com/mundo/noticias-56191591
 Exam Number: B172600

The article entitled "How does WhatsApp make money if its service is free for most users?", by Boris
Miranda, reveals the different business plan WhatsApp is using to generate direct profits by being a
free application and avoiding ads.

As you may know, the most popular messaging app was founded in 2009 and bought by Facebook in
2014. It is present in more than 180 countries and has a turnover of around 20 billion dollars (Statista,
2020). Initially, it was intended to charge 1 euro for an annual subscription, but when Mark Zuckerberg
took over the app, he decided that it would be free and would not include advertising.

While Facebook includes ads and generates about $86 billion in direct revenue (Statista, 2020),
WhatsApp is a "closed" company, where a developer cannot easily access its code to develop other
complementary technologies or services to generate revenue. This is why, as expressed in the article,
Facebook and Instagram are the shop windows and WhatsApp is considered the cash register.

But how does it achieve this? The commercial value of the app is focused on business services and
transaction fees through WhatsApp Business (API) as it is offered as a mechanism for small businesses
to use it as a customer service centre and point of sale. 5.25 million businesses already make use of it
(Nick Lane, 2020). Although the services offered by the application are not too costly, there is a charge
for it, depending on the type of account the customer has.

However, there is a great deal of controversy surrounding this issue, as many experts believe that the
commercial value of the platform and therefore what really generates profit for them is necessarily
their data. WhatsApp's database contains information on 2 billion people, including phone numbers,
times and hours of use, geolocation.... On the one hand, this benefits Facebook, which manages to
generate more profits by making use of this information, and on the other, companies that use
WhatsApp to sell their products, as they can use this data to profile potential customers.

At the same time, as stated in the article, a change in privacy policy two months ago gave Facebook
greater access to WhatsApp users' data. However, this change does not apply to users from EU
member states. What is the reason and to what extent are these practices lawful?

The use of personal data can lead to potential abuses, which is why data protection laws are crucial.
The European Union has had a data protection regulation (GDPR) in place since it came into force in
May 2018. This law is considered the strictest privacy and security law in the world and imposes
obligations on organisations everywhere, whenever they target or collect data relating to individuals
in the EU. Within its principles, we find; lawfulness, fairness and transparency "processing must be
lawful, fair and transparent to the data subject", storage limitation "you may only store personally

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identifiable data for as long as necessary for the specified purpose", accountability "the data controller
is responsible for being able to demonstrate GDPR compliance with all these principles" (GDPR, 2021).

On the other hand, data privacy is now the number one concern for 82.9% of the UK population. for
82.9% of the UK population, but, according to a 2020 survey, more than half of all adult respondents
in the United Kingdom (UK) said they were already familiar with some, but not all aspects of how their
personal data is handled by companies and organisations. This makes them distrustful and feel
threatened.

To summarise, digital platforms focus their strategies on combining their data-driven services,
capturing, processing, structuring, analysing and using their users' data along their journeys to
generate new business or enrich existing business. But, at the same time, concerns about the
complexity and vulnerability of digital systems and the human need to know how organisations use
our data and how they can protect it from misuse. (Carlos Cruz, 2019). Therefore, despite the fact that
for these platforms the user is the product, they must, on the one hand, be more transparent when it
comes to letting users know what data they are collecting and how they use it and, on the other, try
to limit and control any abuses that may occur, improving their security systems and avoiding
advertising policies that use user data without their permission.

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