A mobile phone application is a software program that allows users to perform specific tasks using their mobile phones. WhatsApp messenger is an instant messaging application that allows smartphone users to exchange text, audio, video, and image messages for free on Windows Phone, iPhone, Android, BlackBerry, and Nokia smartphones. Apart from instant messaging service, WhatsApp also offers smartphone users the opportunity to perform group chats and share locations. Unlike the traditional messaging system, WhatsApp relies on the phone’s data connection enabling the user to send unlimited messages without having to pay for individual messages. WhatsApp Messenger was introduced by WhatsApp Inc., a company founded in 2009 by Jan Koum and Brian Acton. The company has its headquarter in Santa Clara, California (Russell, 2013).
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Technical description of the WhatsApp application
Technically speaking, the customized version of the open standard Extensible Messaging and Presence Protocol (XMPP) enables smartphone owners to use WhatsApp. Extensible Messaging and Presence Protocol is a protocol based on Extensible Markup Language (XML) and it is meant for online presence detection and instant messaging (The Internet Society, 2004). This protocol allows near-real-time communication between or among servers. With the Extensible Messaging and Presence Protocol, Internet users can send instant messages to their friends who are connected to the Internet, irrespective of differences in browsers and operation systems among them. In order to get started on WhatsApp, one must have a fairly modern smartphone that has the customized version of the open standard Extensible Messaging and Presence Protocol (XMPP) (The Internet Society, 2004).
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One has to download the WhatsApp application on his smartphone before he can begin the process of exchanging messages. The application can be downloaded from the iTunes App store for iPhone users, from the Marketplace for Windows Mobile users, and from the WhatsApp download page for other mobiles. Users are required to pay 0.99 United States Dollars in order to download WhatsApp application from the iTune App store. However, users can download the WhatsApp application for free on BlackBerry, Androis, Windows Phone, and Nokia and use it for free for the first 12 months before they can pay for an annual subscription of 0.99 United States Dollars. Users of iPhone are not required to make this annual subscription of 0.99 United States Dollars.
After downloading the WhatsApp application, smartphone users must register the application on their phones. WhatsApp registration on the smartphone is done by entering the user’s name and his or her mobile phone number. A text message with a code that should be used to complete the WhatsApp registration is then sent to the mobile phone number provided. After the WhatsApp Messenger has been correctly registered on the mobile phone, the user is now free to add a profile picture to his or her account. The smartphone user does not have to create a new list of contacts on WhatsApp application. However, contacts of people who are using the application can be obtained from the existing mobile phone address book. From here, WhatsApp application makes it easy for smartphone users to start sending and receiving messages. The phone users are also free to invite their colleagues who are not using WhatsApp to join. Communicating using WhatsApp is very simple and fast so long as the user’s smartphone is connected t the Internet (Bouhnik and Deshen, 2014).
There are different types of mobile phone messaging applications available in the modern market. People have to understand the benefits of a given messaging application before choosing to download and install it on their smartphones. Those who choose to download and install the WhatsApp application enjoy a number of benefits that encourage them to continue using it over and over again. The clearest benefit of using WhatsApp application is reduced communication costs because the users do not have to incur extra costs on every individual message sent (Bouhnik and Deshen, 2014). The user only needs to incur the costs of purchasing a data bundle package. However, no additional costs are met if an individual has to use WiFi networks to connect to the Internet. Additionally, WhatsApp provides users with an opportunity to send more messages than they would have sent in the absence of the application. Even though many people commonly use text to communicate on their mobile phones, they cannot include some form of media such as videos in their text messages if they do not have an instant messaging application. With WhatsApp, one can include audio files, videos files, as well as emotions on messages (Bouhnik and Deshen, 2014).
When a person sends a message using WhatsApp, he or she is notified by a minute check mark that the message has been sent successfully. A double check mark indicates that the message has been successfully delivered to the recipient. The check marks help the sender to know whether the message has reached the recipient or not. The WhatsApp application also indicates the time when the message was last seen by the receiver. Another benefit obtained from the WhatsApp application easy group chats that allow the user to send a message to all group members at once. The WhatsApp application helps mobile phone users to exchange messages everywhere and at any time (Bouhnik and Deshen, 2014).
The business model related to collection of revenues
Many users have gained interest in understanding how the WhatsApp instant messaging application is able to collect revenue when its services are free of charge. There are two different ways through which WhatsApp collects its revenue. According to Delevett and Bailey (2013), WhatsApp collects its revenue through two business models namely; subscription fee and database management. WhatsApp is a subscription-based service where smartphone users are expected to pay a subscription fee of 0.99 United States Dollars after using the service for free for a period of one year. People who use WhatsApp on iOS platform have to purchase the application for 0.99 United States Dollars before they can use it. However, not even a single person has been reported to have paid the 0.99 United States Dollars after enjoying the WhatsApp service for free for one year. Ideally, WhatsApp continues to extend its services for free every time the users approach the expiry date. According to Delevett and Bailey (2013), the subscription fee method of revenue generation does not necessarily generate revenue for WhatsApp in real sense.
Many people believe that WhatsApp generates its revenue primarily from the BigData or through database management. All messages that are users exchange on WhatsApp are being saved in the application’s servers. Most of the time, people express their feelings, preferences, opinions, and so many things through messages that are exchanges on WhatsApp. This data is used by companies to offer services that match the preferences of users. At the same time, these companies pay WhatsApp for the BigData. Since 2009, WhatsApp users have continued to rise, even exceeding the number of users on other instant messaging applications. By 2013, there were approximately 320 million WhatsApp users, 280 million Skype users, 200 million Viber users, and close to 198 million WeChat users per month. The large huge number of WhatsApp users shows that the number of messages exchanged on WhatsApp on a daily basis is also incredibly high. In view of the usefulness of the information available on WhatsApp backups, big organizations are always ready to pay huge amounts of money for information saved on WhatsApp (Delevett and Bailey, 2013).
Analysis of WhatsApp business model
The WhatsApp application and its two business models are a goof match in today’s mobile environment. Even though the subscription-based model of revenue generation does not necessarily generate revenue for WhatsApp in real sense, the number of number of WhatsApp users continue to rise at a faster rate as compared to those of its competitors. Additionally, although the data management model of revenue generation is merely speculation, there is no any other justified model that WhatsApp uses to generate money (Delevett and Bailey, 2013).
WhatsApp’s Chief Executive Officer has clarified that the number of chats on WhatsApp has been rising rapidly over the recent past due to its subscription-based business model. The fact that WhatsApp is free to download in majority of smartphones, with an in-app payment of 0.99 United States Dollars every year after twelve months of free usage, many people have downloaded and installed WhatsApp in their smartphones (Russell, 2013). The business model has put WhatsApp at the right position in the competitive mobile market. A very good example is how WhatsApp competed with other instant messaging applications in Spain. Line, a smartphone mobile phone application like WhatsApp has been conducting an extensive marketing campaign in Spain. This has resulted into more than 15 million downloads every month. Surprisingly, WhatsApp downloads still exceed those of its competitors in the mobile market and it remains the most actively used messaging application by smartphone users (Russell, 2013).
WhatsApp uses a very straightforward business model because active subscribers only have to pay 0.99 United States dollars and have unlimited access of various features. It is not clear how many active subscribers WhatsApp has but it is assumed that the number could be anything between 400 million and 1 billion active subscribers. The subscription-based business model is a good match in today’s business environment because subscribers will always choose to renew their subscriptions for only 0.99 United States Dollars in order to keep in touch with friends who are still using the application. In the process, more and more revenue is generated which gives WhatsApp the opportunity to be at a good position in the competitive mobile market (Russell, 2013).
As the number of WhatsApp subscribers continue to rise, the amount of information stored on WhatsApp backup increases rapidly. This encourages big companies to give WhatsApp huge amounts of money in exchange of this information (Russell, 2013). The two business models that WhatsApp uses to generate its revenue have resulted into tremendous financial growth for WhatsApp Inc (Russell, 2013). WhatsApp is winning the competition battle in the mobile market by some margin due to its two business models. According to WhatsApp’s Chief Executive Officer, the only way through which the effectiveness of the WhatsApp’s business model can be analyzed is by comparing the application’s performance to that of its major competitors. WhatsApp’s dominance in the mobile market is enough proof that it generates huge revenue from its business model (Delevett and Bailey, 2013).
Russell (2013) however points out that despite the huge lead that WhatsApp has in the mobile industry, it is still not clear whether WhatsApp will maintain the same position both in the United States and worldwide over the next few years. WhatsApp application uses a simple design that allows many people including those with little mobile phone knowledge to use. However, with other mobile phone messaging applications adding video calling, stickers, games and other features, people will be attracted to the unique experiences offered by other applications. As many people will continue to seek more than just basic from mobile phone messaging applications, WhatsApp is soon approaching saturation and the much anticipated saturation is likely to affect its growth (Russell, 2013).
Smartphone users are aware that WhatsApp is not the only mobile application in the mobile phone industry. There are many other popular applications such as Kakao Talk and Kik that are used by many clients across the world. One thing that needs to trouble application providers is the application that will attract the largest number of users. WhatsApp founders are however reluctant to reveal the exact number of active subscribers who are using this application, but it is confirmed that the application has more than 300 million users monthly. The subscription-based business model used by WhatsApp, a free service for 12 months and an annual subscription of 0.99 United States Dollars, is meant to attract huge number of smartphone users to download and install the application irrespective of their income levels. However, some people feel that WhatsApp is likely to face stiff competition in the near future from other totally free applications as well as from applications that offer additional features such as advertising.