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Signal Business Model: How Signal Makes Money

Before the age of technology, it was relatively easier to lead a life private. But as our lives become increasingly digital, maintaining personal privacy has become more complicated and deserving of more time and thought than earlier.

These days, technology giants like Google and Facebook track and store data about us to enable advertisers to target us with ads efficiently. And it’s not just that. Data breaches and inappropriate data sharing have also become common. According to Wikipedia, a collection of 2.7 billion identity records were posted on the web for sale in 2019 alone, of which 774 million were unique email addresses and 21 million were unique passwords.

Even worse, it sometimes feels that you’re stuck in a perpetual catch-22 – either you like the convenience offered by these sites, or you value your privacy. In many cases, you can’t have it both ways.

Fortunately, consumer demand for private interactions online has only increased, which means that there is a growing market for privacy-oriented apps and websites. When it comes to messaging, Signal is one of the best options out there. As an open-source project, Signal is an ideal messaging alternative for the privacy-conscious.

If we want to talk about Signal’s privacy-first approach, the conversation cannot avoid the elephant in the room — WhatsApp. In this piece, we will see how Signal works, compare how WhatsApp & Signal differ, and then learn about the business model of Signal because the added context will help us better understand how the incentives of both apps differ.

How Signal Works

Signal uses what’s called end-to-end encryption, meaning that every message is encoded through the app. Best of all, Signal doesn’t have the key to that encryption, so the company can’t look at your messages if someone requested them.

Even better, Signal doesn’t store any information about you – like, at all. When you start the program, you must open up your contact list to see who else is using Signal.

The software uses a cryptographic hash function to conceal phone numbers within your contact list, and those numbers are truncated for further protection. Signal also doesn’t store metadata or offer cloud storage for its users. The best information it can provide to a third party is the day that a user logged in. You can’t even see a timestamp.

For users who value privacy above all else, the lack of a cloud-based backup means that no one can access your messages, not even you (if you lose your phone or get a new one). That being said, Signal does allow you to import and export data locally if you have an Android, but iPhones don’t come with this feature.

Considering that WhatsApp is one of the most widely used messaging apps globally, and Signal is still relatively new, there are some substantial differences between them. Let’s break down the differences: 

Userbase (WhatsApp Vs. Signal)

As of 2022, WhatsApp had over has more than 2 billion monthly active users worldwide. For those in the US, WhatsApp is not as popular as it is overseas, but there are still 75 million monthly active users.

WhatsApp’s popularity means that it has strong network effects and convincing friends and family to download & use WhatsApp is not a challenge. Comparatively speaking, Signal’s user base is tiny.

With close to 40 million active users as of January 2022, Signal’s user base pales in comparison to WhatsApp, so chances are that you’ll have to educate your family and friends about its benefits and get them to download the app before you can get value from using Signal.

Messaging Encryption (WhatsApp Vs Signal)

Both WhatsApp and signal use end-to-end encryption to encrypt data messages sent between users, both individually and in group chats. In fact, WhatsApp uses the Signal Protocol, which has been developed by Signal, to provide end-to-end encryption.

Since WhatsApp uses the same open-sourced software as Signal, both messaging apps are quite similar in terms of how they encrypt user messages. In 2016, WhatsApp started providing full encryption on all messages, including multimedia ones with pictures and video clips, which was enabled by a partnership with Signal.

On the other hand, Signal has always been using end-to-end encryption. What’s interesting about Signal, though, is that you have to change the settings for the program to save any images or videos to your phone. As an added method of protecting your information, Signal won’t do this automatically, both with messages you send or receive. 

Metadata (WhatsApp Vs. Signal)

According to WhatsApp’s privacy policy, “We collect information about your activity on our Services, like service-related, diagnostic, and performance information. This includes information about your activity (including how you use our Services, your Services settings, how you interact with others using our Services (including when you interact with a business), and the time, frequency, and duration of your activities and interactions), log files, and diagnostic, crash, website, and performance logs and reports.”

This means that your contact list can be stored and accessed later on. While the company cannot read your messages, this may be enough to cause some concern among the privacy-minded out there. 

On the other hand, Signal does not store any metadata. The only thing that the Signal server stores are the last time a user connected to the server and even that information is reduced to the day in terms of precision, not the hour, a minute, or the second.

Cloud Storage (WhatsApp Vs. Signal)

As with other messaging apps, WhatsApp can connect to your Google Drive or iCloud account. If you have set up automatic backups, messages stored on your phone (including images or video clips) will likely be uploaded.

You can change your phone’s settings to prevent this from happening though if you’re concerned about third-party access. One thing to keep in mind with end-to-end encryption is that it only works in the software itself.

Once the messages are outside of WhatsApp (i.e., in the cloud), they can be hacked. And as we know, Apple and Google are also not exactly secretive when it comes to storing and tracking data, so backup your messages at your own risk. 

Signal, on the other hand, doesn’t have this problem. You can’t store messages on your phone, although you can download and save pictures and video files. Overall, this means that there is no potential security breach within Signal itself. For someone to read your messages, he or she will have to break into your phone and look at them within the app. However, there’s a way around that too. 

The app comes with a feature called “disappearing messages.” This feature will delete your data based on a preset amount of time, such as five seconds or five days. Utilizing this option can protect your messages on your device, just in case you’re worried about theft. However, you will also need to encourage your contacts to follow suit, as their devices can be potential liabilities if they don’t delete your conversations. 

WhatsApp also integrated the dissapearing messages feature within the app in late 2021.

How Signal Makes Money

Here is where Signal and WhatsApp differ the most.

Facebook owns WhatsApp, and even though the app is ad-free as of now, Facebook could eventually put ads on WhatsApp. Due to disagreements over monetizing WhatsApp through ads and protecting user privacy, both the founders of WhatsApp resigned from Facebook. Brian Acton, one of the co-founders of WhatsApp, even went on to invest $50 Million Into Signal.

As far as WhatsApp’s revenue is concerned, accurate earning statements are hard to come by, but WhatsApp’s revenue currently comes from businesses utilizing the service to communicate with customers directly and WhatsApp Pay.

Regardless of its money-making power, WhatsApp is still a for-profit business. Facebook bought the app for a whopping $19 billion, and as the user base continues to grow, it will only become more of a potential cash cow. Remember, Facebook is still free to use, but it makes boatloads of cash. 

On the other hand, Signal is a non-profit organization — it does not exist to mint money for owners or investors but for the higher purpose of protecting user privacy via private communication. To sustain operations, Signal makes money by accepting users’ donations in traditional government-backed currencies and from cryptocurrencies.

This lack of a for-profit business model is a significant reason the app is so focused on privacy. Since the company isn’t trying to make money, it exists for the sole benefit of the user. Instead of profits, it relies on donations to stay up and running. Also, because the program is open-sourced, developers can offer patches and solutions, all without racking up a substantial bill (similar to Wikipedia or WordPress). 

As per BBC, Signal was being used by 40 million active users as of January 2022. Signal. The app sees increased growth during times of political turmoil and suppression of voices, competitor outages, and failure of competitors to address the privacy concerns of their users. After WhatsApp announced a contentious privacy update in Jan 2021, Signal saw unprecedented user growth. In a span of just three days, between 12 & 14 January 2021, Signal installs on Google Play increased from over 10 million to over 50 million.

According to an article by Verge, Signal has set itself a goal of reaching 100 million active users as it would lead to enough donations to secure Signal’s long-term future. Signal might never see WhatsApp’s user base as a messaging app, but its strategy of a morally responsible David taking on evil goliaths is bound to keep attracting users, even though at a slower pace.

In recent years, Signal has also tried to evolve beyond its primary use case of messagaging. As an organization that exists to uphold users’ privacy to the highest standards, Signal has also been eyeing other use cases where it sees a lack of concern to protect privacy. In April 2021, Signal rolled out a payments beta test, adding support for a privacy-focused payments network called MobileCoin, which has its own cryptocurrency named MOB. The payment functionality test, which started in the UK, was rolled out globally in November 2021.

In the future, Signal could strengthen its value proposition of safeguarding users’ privacy even more by tackling other use cases in need of a privacy-conscious building approach.

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How Signal Protects Privacy & Makes Money Staying Free
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How Signal Protects Privacy & Makes Money Staying Free
Signal is a non-profit organization — it does not exist to mint money for owners or investors but for the higher purpose of protecting user privacy via private communication. To sustain operations, Signal makes money by accepting users’ donations in traditional government-backed currencies and from cryptocurrencies.
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Muaaz Qadri
Muaaz Qadri
A Proud Computer Engineer turned Digital Marketer