Telegram is navigating turbulent waters at the end of the summer with the arrest of CEO Pavel Durov in France. Durov is facing an investigation about the lack of moderation on his platform and how that permissiveness potentially fomented criminal activity.
This controversial moment raises the question of how this app, which most people use for free and which, until recently, didn’t even have a direct monetization option, makes money.
The context. Unlike Instagram or its cousin, Facebook Messenger, Telegram doesn’t display traditional ads or sell access to users’ data. So, how does it monetize?
It’s difficult to answer because it isn’t a publicly traded company and doesn’t file public financial reports. However, previous media reports and other data help us piece together the puzzle.
The numbers.
- Durov told the Financial Times that Telegram’s annual operating cost is less than 70 cents per monthly user, or about $600 million.
- More than 950 million people use the app each month. It might already be close to surpassing 1 billion users. The company forecasts that this should happen “before April 2025.”
- The valuation offered by investors, according to Durov, is over $30 billion.
- He also told the Financial Times that it had revenues of “hundreds of millions of dollars” in 2023 and 2024, which is an ambiguous way of saying “between $101 million and $999 million,” presumably closer to the first figure.
- TON (The Telegram Network) raised $1.7 billion in tokens in 2018 but had to repay the money and cancel the project two years later due to regulatory issues.
Income sources.
- Advertising. Telegram has been introducing advertising in certain regions for some time, with a minimum spend of between $1 million and $10 million per advertiser or agency. It plans to expand this offering globally and automate the system to attract smaller advertisers.
- Revenue sharing with creators. For several months, Telegram has been sharing 50% of ad revenue with creators of popular channels.
- Premium features. In June 2022, Telegram launched Telegram Premium, a subscription service that offers faster downloads, enhanced voice chat, and unique animated stickers.
Telegram also has two pending features aimed at direct monetization.
- API and enterprise services. Telegram offers its API to developers and companies to create bots and custom services. This is a potential source of revenue, especially if Telegram segments it with advanced features.
- “Social discovery.” This feature will allow users to meet people nearby or go on dates with them.
In detail. Durov said earlier this year that Telegram could reach profitability this year or next year. The app has raised about $2 billion in debt financing, including a nearly $1 billion bond offering between 2020 and 2021.
In any case, these statements imply that Telegram remains unprofitable today, and that’s unlikely to change anytime soon.
The future. Telegram is considering an initial public offering (IPO). If the company goes public before March 2026, bondholders will be able to convert their debt into shares at a discount, which is an incentive for Telegram to go public before then.
Durov also mentioned the possibility that the most loyal users would be able to buy shares during the IPO before it’s open to the public (Reddit, which went public in March, offered a similar option). He is also considering the creation of an AI-powered chatbot.
The problems. Durov’s arrest represents a significant complication for his ambitions. On one hand, if authorities successfully enforce moderation on Telegram, people who use it because of that laxity might leave or reduce their use. This would eliminate direct revenue.
On the other hand, advertisers will be reluctant to invest in the platform, at least until everything settles down and becomes transparent.
Image |Flickr (Focal Foto)
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