How WhatsApp Will Help Make Facebook Money

NEW YORK (TheStreet) -- WhatsApp may have surpassed 600 million monthly active users but the world's largest messaging app is just beginning to monetize, as it seeks to move beyond the traditional SMS (standard messaging service) market.

Now serving 600,000,000 monthly active users. Yes, active and registered are very different types of numbers...

— jan koum (@jankoum) August 25, 2014

WhatApp has been making inroads to the SMS market since it came into existence five years ago. According to research firm Strategy Analytics, SMS revenue fell 4% in 2013 to $104 billion. The research firm expects that SMS revenue will fall by another 20% by 2017, as "intense competition for subscribers between operators combined with the fast growing popularity of over-the-top instant messaging services like WhatsApp, Line Messenger and Tencent's WeChat" continue.

WhatsApp, which charges $1 a year for its service after a year of free use, is the fastest growing social network/messaging service ever, having surpassed Facebook (FB) in its first five years of existence. Facebook, which announced its intention to purchase WhatsApp earlier this year for $19 billion in cash and stock, has not put pressure on WhatsApp to grow revenue but rather its user base.

Read More: Mark Zuckerberg Thinks $19B For WhatsApp Is Cheap

On the conference call discussing the transaction in February, Facebook CEO Mark Zuckerberg said the focus of WhatsApp would be to build its user base and worry about making money once the user base has expanded significantly.

"Our explicit strategy is for the next several years to focus on growing and connecting everyone in the world," Zuckerberg said. "And then we believe that once we get to being a service that has billion, 2 billion, maybe even 3 billion people one day, that there are many clear ways that we can monetize, but the right strategy we believe, is to continue focusing on growth and the product and succeeding in building the best communication tools in the world," he said.

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