Blog Media & Marketing

WhatsApp Is Open for Business (Finally)

Photo of Georgia Meyer
by Georgia Meyer

Four years after Facebook purchased WhatsApp for $19 billion, the ubiquitous messaging app is ramping up its revenue potential with the launch last week of a suite of business tools and new advertising inventory on the app. Given Facebook’s recent share price drop of 20%, following news that user growth is slowing (and in some cases shrinking) in its most lucrative markets, this announcement is timely indeed.

Helpfully for Facebook, a market standard for monetising messaging apps has already been set by China’s WeChat, that has one billion MAUs worldwide. Facebook (like many tech companies) is not shy about using other tech companies as templates for successful iteration of business and product strategy.

Developed versus developing growth

The opportunity for messaging app monetisation functions differently in developed and developing economies. Consumers in developing economic markets are more accustomed to mobile payment formats, where digital wallets have for a long time facilitated decentralised economic activity. In contrast, consumers in developed markets are more attached to behaviours they formed with non-mobile formats like desktop PCs.

Whilst this suggests a larger revenue growth opportunity in developing markets, where user growth for social apps (including messaging apps) has not yet reached saturation, this potential is offset by considerable disparities in disposable incomes amongst consumers across the globe. Leaving the question of the global distributions of revenue growth from mobile ecommerce activities to one side for a moment, it is clear that the future trajectory of growth for Facebook will come from its suite of mobile native apps i.e.: Instagram, WhatsApp and Facebook Messenger.

Revenue potential

The newly forming monetisation opportunities across Facebook’s repertoire of mobile apps now include a range of differing services and features. For example: business accounts for WhatsApp, which can function as ‘customer service by chat’, will enable businesses to have direct conversations with their consumer bases (in a cheaper format than call centres); ads in WhatsApp’s story feature: Status; promoted posts on Instagram; ads in Instagram’s story feature; Instagram ecommerce (in-app payment functionality has been being tested since June 2018); ads across IGTV; and ads in the Chat section on Facebook Messenger (rolled out last month). Should DAUs across these services and product features continue to grow at current rates, the additional revenue potential for Facebook is significant.

Competition considerations

At this point it becomes prudent, necessary even, to consider marketplace competition. Facebook’s competitive strength in having a de-facto monopoly on messaging apps outside of China is also it weakness. In an evolving regulatory environment which is increasingly sceptical of big tech, the monopolistic power of Facebook is increasingly viewed as a hindrance, rather than a benefit to the consumer. Facebook’s track record of buying up disruptive competition (both Instagram and WhatsApp were acquired to harness their respective implicit disruptive threats to Facebook’s PC-based social media, and Facebook’s nascent mobile offering.)

As controversy around tech’s Big Four has increased over their growing dominance of the digital economy, there have been murmurings from the media and politically incentivised politicians in both the US and the EU that their assets should be broken up. If Facebook was forced to give up WhatsApp and / or Instagram then the ramifications for the social media giant would be huge.

Facebook’s role in facilitating the public ambiguity around the term ‘platform’ as opposed to ‘publisher’ or ‘media company’, could potentially now come back to haunt the social media giant in the wake of the backlash which the company has been subjected to amid revelations around fake news and the Cambridge Analytica data scandal. The sooner WhatsApp can successfully execute on its monetisation strategy, the sooner Facebook can move forward as a diversified media distributor, and the more likely it is to evolve beyond its current existential crisis.

The discussion around this post has not yet got started, be the first to add an opinion.


Add your comment