This week, the Facebook-owned instant messaging app WhatsApp announced it was eliminating the nominal $0.99-per year subscription fee it was charging customers after their first year using the service.

As Latin Post previously reported, WhatsApp admitted the subscription model wasn't working, especially since many users without access to a debit or credit card had few avenues with which to pay the small fee.

Those users, including many in Latin America, rely on WhatsApp as an alternative to costly SMS services to stay in touch. And as WhatsApp's announcement put it, they "worried they'd lose access to their friends and family after their first year."

But there's more strategy behind the switch than that. As WhatsApp heads towards a billion users across the globe, the messaging service is setting off on an experimental path this year to figure out how to make real money from its massive user base. As Wired reported, in the next few months WhatsApp will begin testing ways to generate revenue from the huge number of businesses that use the app.

Growth Over Revenue

WhatsApp benefits from being part of Facebook, which bought the app for $19 billion and gave its CEO Jay Koum a deal of autonomy to focus on growth over revenue, and from a tiny staff (especially relative to the size of its user base) of about 120 employees.

And WhatsApp has grown, but not as fast as Koum wanted. The app recently hit 990 million users, which as he told Wired, was actually frustrating. "On the one hand, this is a huge," said Koum. "On the other hand, it's a little embarrassing. We're about 10 million short."

Eliminating the $0.99 yearly subscription fee, according to a quick back-of-the-napkin calculation, eliminates about $980 million per year in revenue. Right?

Actually, according to Business Insider, a leaked document revealed revenues around $15 million for the first half of 2014. Considering WhatsApp had over 500 million active monthly users at the time, not very many users end up paying for the service anyway.

But while dropping the subscription fee will nevertheless translate into a drop in some amount of revenue, it eliminates a reason why WhatsApp hasn't hit the big "billion" yet: Users dropping the app after the free year is over.

"For people in India or Brazil," explained Koum, "it's very hard for them to pay. They don't necessarily have credit cards or the infrastructure to make payments."

Mirroring Messenger?

To make up for the subscription revenue, and to start making Facebook-level dollars off its (nearly) Facebook-level user base, Koum said that WhatsApp is going to begin developing products for businesses that use its app looking to connect with consumers.

The details of how the company will go about doing this are still unclear, but Koum stated outright on WhatsApp's blog that the messaging app will not consider going the route of third-party ads.

Instead, Koum is hinting at a more organic, personal service-oriented route to facilitate communication between businesses and customers on its chat service. "We've done really well in the consumer space," he told Wired, "but there is a whole other aspect of communication as you go through your day: You want to communicate with businesses."

Koum gave examples like banks alerting and chatting with customers about fraudulent charges, airlines broadcasting flight delays, or people making reservations at a restaurant through WhatsApp. It sounds a lot like the direction Facebook Messenger has taken recently, for example allowing you to hail an Uber from within app.

While WhatsApp has been kept mostly independent from the Facebook mothership, the app's new Messenger-like plans hints at a future where smart in-chat app services eliminate the need to ever leave Zuckerberg's social ecosystem -- soon expanded to another billion people.

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