Opinion WhatsApp to introduce ads: All you need to know

WhatsApp will also let users pay to promote their Channels, the one-to-many broadcasting feature to share textual or visual content with followers. In addition, followers will also have the option to pay a monthly fee and subscribe to individual Channels for exclusive content.

Note that these new features will be sequestered to WhatsApp’s ‘Updates’ tab, which is reportedly being used by 1.5 billion people a day: WhatsApp will not show users ads in personal chats or the calls tab.

Nonetheless, the rollout of ads in the Updates tab marks a turning point for a platform deeply woven into the social, economic, and political fabric of countries across the world. It could signal the start of Meta’s broader push to monetise WhatsApp’s two billion-strong user base, with India as its largest market.

How WhatsApp currently makes money

How WhatsApp makes money while offering most of its services for free has long been a point of curiosity for users. For starters, WhatsApp is backed by its parent company, Meta, which also owns Facebook and Instagram. The social media giant raked in more than $160 billion in ad revenue from Facebook and Instagram in 2024.

In its early days, WhatsApp had a subscription-based revenue model where users had to pay $1 every year to access the app. For some countries, WhatsApp was free for the first year with the $1 charge applying from the second year. In 2014, Meta (then Facebook) bought WhatsApp for $19 billion and scrapped the annual subscription fee two years later. At the time of the acquisition, both companies were unequivocally against in-app ads and sharing user data with commercial entities.

Meta does not report platform-specific revenue, but estimates suggest that WhatsApp accounts for less than one per cent ($1.3 billion) of the big tech company’s yearly earnings. “Paid messaging is a bit earlier in the journey, but it’s also doing well, and we’ve passed a $1 billion run rate,” Alice Newton-Rex, WhatsApp’s vice president of product, was quoted as saying by Financial Times last year.

While still a small slice of the pie, here is how WhatsApp has been generating revenue so far:

Business API: WhatsApp’s primary revenue stream, where it essentially makes money from government and enterprise customers looking to communicate with users at scale. This includes e-commerce sites updating users about their purchases, airlines and travel apps using WhatsApp to share boarding passes and travel alerts, etc. The pricing is dependent on the region as well as volume of messages.

Click-to-WhatsApp ads: Businesses can pay to include a link in their ads that opens a WhatsApp chat with users when they click on it, connecting them directly to the business. These click-to-message ads appear on feeds and stories on Instagram and Facebook as well as Facebook Marketplace. In 2023, Meta CEO Mark Zuckerberg said that click-to-message ads had reached a $10-billion revenue run-rate globally.

WhatsApp Pay: It is a way for users to send money directly through the app. While it is free for individual users, businesses need to pay a fee for payments received through WhatsApp, similar to other digital payment processors. WhatsApp Pay has only been rolled out on a large scale in select markets like India, Brazil, and Singapore. Earlier this year, the NPCI lifted its 100 million-user cap on WhatsApp Pay, allowing access to all 500 million users in India.

In addition to these direct revenue streams, WhatsApp also collects metadata on user behaviour which could be of significant value in the digital advertising space. As the familiar adage goes: if you are not paying for the product, you may be the product.

How ads will work in WhatsApp

Ads will be served to users within WhatsApp using Meta’s technology. The company said it will not draw from users’ personal messages, calls, and statuses to target ads as that content will remain end-to-end encrypted.

Instead, WhatsApp said it will rely on data points such as a user’s city, country, and language to determine what ads to show them, along with tracking user behaviour such as the Channels they are following and the way they interact with ads.

The company will also engage in cross-platform profiling of users who have chosen to link their WhatsApp accounts to the Accounts Center. “Adding WhatsApp to Accounts Center is optional, off by default and can be removed at any time,” Meta clarified.

“People can easily see why a specific ad is being shown and hide or report ads directly on WhatsApp. People can also go to Ad preferences to see recent ad activity and manage their ad settings,” it added.

However, users do not have the option to completely opt out of seeing ads on WhatsApp.

How other messaging apps work

In response to WhatsApp’s announcement, Meredith Whittaker, the president of Signal, promised that the independent non-profit-owned messaging app will not have any AI clutter or surveillance ads, regardless of what the rest of the industry does.

Signal is known for its encrypted messaging protocol. It does not have any investors and runs on donations. In 2018, Brian Acton, one of the co-founders of WhatsApp, donated $50 million to Signal.

Meanwhile, Discord has adopted a freemium model which means that it is free to sign-up but additional features such as games come with a price tag. The messaging app popular among gamers also offers a monthly subscription package called Nitro with access to high-quality video streaming and custom emojis.

However, advertising continues to be the most popular business model among social networking apps. It is the main source of revenue for Snap, the company behind Snapchat, which reported a nine per cent YoY increase in advertising revenue to $1.21 billion in the previous quarter.

Given Meta’s track record with monetisation and brand integration, ads on WhatsApp could generate over $10 billion in annual revenue within a few years, according to analyst estimates cited by Market Watch.