Telegram’s path to profitability seems doubtful

Pavel Durov has some tax problems. On the one hand, the founder of the Telegram messaging app cannot leave France after the national prosecutor’s office accused him of allowing his platform to be used for money laundering and child sexual abuse materialThe question of how your business can make money may seem insignificant in comparison, but it is arguably just as tricky.

Before his legal trouble, Durov’s main challenge was preparing the company he wholly owns for an initial public offering or a sale to big tech. Telegram generated revenue of $342 million in 2023, according to the Financial TimesDivided by an estimated 850 million monthly active users for the same period, that equates to revenue per user of 40 cents. However, Durov also said earlier this year that its average costs per user were less than 70 cents, implying that it currently loses 30 cents on every Telegram customer.

The simplest solution would be to pivot Telegram toward a business model more like Facebook’s. The social network, owned by Meta Platforms, makes most of its revenue from advertising. Like Facebook Groups, public Telegram channels created by users can host an unlimited number of them. In theory, Durov could charge advertisers to show their ads to a specific group of Telegram users.

But this would be expensive. Governments around the world are pressuring Telegram’s social media rivals like Elon Musk’s X to moderate content. That’s costly: Meta has hired 40,000 employees and spent $20 billion since 2016 to keep the platform secure, a Meta spokesperson says. That $2.5 billion annual expense works out to $0.83 per monthly active user, according to Breakingviews’ calculations that assume nearly 3 billion Facebook customers. The extra cost of moderation would triple Telegram’s losses per user to $1.13, or $1 billion in total.

In any case, imitating Facebook is tricky: Advertisers are unlikely to flock to a platform with illicit content. Hence, one alternative is to market Telegram as something more like Meta’s WhatsApp messaging service. Telegram differs from WhatsApp in that it currently does not automatically enable end-to-end encryption, which ensures that messages are only read by the sender and recipient. But switching to a purely messaging service and limiting the number of users on its channels could allow Durov to avoid the costs of Facebook-style content moderation.

Unfortunately, this type of business model is notoriously difficult to monetize. Despite owning it for a decade and generating billions in revenue through Facebook and Instagram ads that click through to WhatsApp, Meta has had a harder time generating revenue through messaging — it only recently raised $1 billion through this avenue. With more than $2 billion in bonds maturing in 2026, Telegram needs to do something. It’s just not entirely clear what.

The authors are columnists for Reuters Breakingviews. The opinions are their own. Translation by Pierre Lomba Leblanc is the responsibility of CincoDías.

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