Telegram is navigating the end of summer amidst turbulent circumstances due to the arrest of its CEO in France. Pavel Durov is currently undergoing an investigation regarding the lack of moderation on his platform and how this laxity has contributed to criminal activities.
This controversial situation prompts the question of how this app, which the majority of users access for free and which, until recently, had no direct monetization method, generates revenue.
Context Unlike Instagram or its counterpart Facebook Messenger, Telegram does not display traditional advertisements or sell access to its users’ data. So, how does it sustain itself?
Answering this question is challenging since it is not a publicly-traded company and does not publicly disclose its financial accounts, but newspaper archives can help us piece together a basic puzzle.
Figures.
- Telegram’s annual operating cost is less than 70 cents per monthly user, according to the CEO in an interview with Financial Times. This amounts to roughly $600 million a year.
- More than 950 million people use Telegram each month, and it might soon surpass the 1 billion mark, with estimates initially set for “before April 2025.”
- According to Durov, investors have valued the platform at over $30 billion.
- In 2023 and 2024, Telegram reportedly generated “hundreds of millions of dollars” in revenue, as Durov informed Financial Times. This vague phrase likely signifies “between $101 million and $999 million,” presumably closer to the former figure.
- The 2018 collection of tokens TON (‘Telegram Open Network’) raised $1.7 billion, but the company had to return the funds and cancel the project two years later due to regulatory constraints.
Sources of Income.
- Advertising. Telegram has gradually introduced advertisements in certain regions, requiring a minimum expenditure of between one and ten million euros from each advertiser or agency. Plans are in place to expand this globally and automate the system to attract smaller advertisers.
- Revenue Sharing with Creators. For several months, Telegram has been sharing 50% of advertising revenue with creators of popular channels.
- Premium Features. In June 2022, Telegram launched Telegram Premium, a subscription service that provides features like faster downloads, improved voice chat, and unique animated stickers.
Telegram is also working on two additional features aimed at direct monetization.
- API and Enterprise Services. Telegram provides its API to developers and businesses for creating custom bots and services, creating a potential revenue stream, especially with advanced features.
- “Social Discovery” Feature. This will allow users to connect with people nearby or arrange dates with them.
In Detail Pavel Durov stated earlier this year that Telegram could achieve profitability by this year or next. Thus far, Telegram has raised around $2 billion through debt financing, including a nearly $1 billion bond offering from 2020 to 2021.
Regardless, these statements suggest that Telegram is not yet profitable on its own and that this situation is unlikely to change soon.
The Future Telegram is contemplating an IPO. Bondholders will have the option to convert their debt into shares at a discount if the company goes public before March 2026, creating an incentive for Telegram to do so.
Durov also indicated the possibility that the most loyal users could purchase shares during the IPO before it becomes available to the general public, similar to what Reddit did. The platform, which went public in March, is also exploring the development of an AI-powered chatbot.
The Challenges Durov’s arrest poses a significant obstacle for his ambitions. On one hand, if the authorities implement moderation on Telegram, users who favored the platform for its leniency might decrease their usage or leave. This would directly impact revenue.
On the other hand, advertisers are unlikely to commit to investing in the platform until the situation is resolved and clarified positively.
In Xataka | How secure is Telegram now that its CEO, Pavel Durov, has been arrested for unclear reasons?
Featured image | Xataka with Midjourney
Telegram’s Financial Landscape and CEO Controversy: Navigating Uncertain Waters
Telegram navigates the end of summer in turbulent waters with the arrest of its CEO in France. Pavel Durov is facing an investigation into the lack of moderation on his platform and how that permissiveness has fueled criminal activity.
The context: Unlike Instagram or its cousin Facebook Messenger, Telegram doesn’t display traditional advertising or sell access to its users’ data. How does it support itself?
It is difficult to answer this question, since it is not a listed company and does not file its accounts publicly, but the newspaper archive helps us to put together a puzzle basic.
Understanding Telegram’s Financial Model
The figures.
- Telegram has an annual operating cost of less than 70 cents per monthly user, which the CEO revealed to the Financial Times. This puts its estimated yearly operating cost at around $600 million.
- With over 950 million users each month, it is on the brink of success in reaching the 1 billion mark, anticipated before April 2025.
- Investors have valued the platform at over $30 billion.
- In 2023 and 2024, Telegram reportedly garnered “hundreds of millions of dollars” in revenue, hinting at a range between $101 million and $999 million.
- In 2018, Telegram raised $1.7 billion for its now-defunct cryptocurrency project, the Telegram Open Network (TON).
Sources of Income
- Advertising: Recently, Telegram has begun to introduce ads in select regions, requiring a minimum spend of €1 to €10 million from advertisers. Plans are in motion to automate and broaden this service globally.
- Revenue Sharing with Creators: Telegram has initiated a program to share 50% of revenue from advertisements with authors of popular channels.
- Premium Features: Launched in June 2022, Telegram Premium is a subscription service that provides enhanced functionalities like faster downloads and unique animated stickers.
Future Monetization Avenues
Telegram is exploring two additional features aimed at direct monetization, focusing on expanding its income sources:
- API and Enterprise Services: By offering its API to developers and businesses, Telegram allows custom bot and service creation, creating a potential revenue source for advanced features.
- “Social Discovery” Feature: This feature will enable users to connect with individuals nearby, potentially finding dates or friendships.
Insights from Telegram’s Leadership
Pavel Durov mentioned earlier this year that Telegram might achieve profitability soon. So far, the platform has accumulated approximately $2 billion in debt financing, including a nearly $1 billion bond offering between 2020 and 2021.
However, these statements imply that Telegram is still not self-sufficient financially and may not be profitable independently in the foreseeable future.
The Impact of Pavel Durov’s Arrest
The future: The inkling of a potential IPO is present, with bondholders having the option to convert their debt into shares at a discount if an initial public offering occurs before March 2026. This creates a strong incentive for Telegram to be publicly traded.
Durov has voiced that loyal users might be able to purchase shares during the IPO, similar to Reddit’s strategy during its public offering in March.
Challenges Ahead
The recent arrest of Durov poses considerable complications for Telegram’s future aspirations. If authorities impose stricter moderation policies on Telegram, many users attracted by the platform’s relaxed rules may decrease their usage or leave entirely, posing a threat to direct revenue generation.
Furthermore, potential advertisers may hesitate to invest in the platform until a favorable resolution is reached, adding another layer of uncertainty to Telegram’s financial future.
In Xataka | How safe is Telegram now that its CEO, Pavel Durov, has been arrested for murky reasons?