It has been almost a decade since Meta, parent company of Facebook, acquired WhatsApp for $19 billion, and they are still seeking to turn it into a profitable platform. Alice Newton-Rex, WhatsApp product director, has informed CNBC that they are focusing on business messaging. Despite its usage in countries such as India and Brazil, WhatsApp is not as widely popular in the US.
Ten years ago, Facebook founder Mark Zuckerberg made waves when he agreed to pay $19 billion for WhatsApp, a messaging app with a minuscule business model. Although its user base has grown exponentially from 450 million to over 2 billion in that time, the app has yet to become a major source of revenue. In stark contrast, Instagram was acquired for a comparatively paltry $1 billion and has been capitalized on with ads. Nor does WhatsApp relate to Metaverse, the ambitious, pricey venture, or Reels, Meta's attempt to compete with TikTok.Yet Zuckerberg remains adamant about the potential of WhatsApp, often highlighting the 200 million people that use the WhatsApp Business app, which facilitates communication between companies and customers. On a June 2022 CNBC appearance, he declared that WhatsApp would be the "next chapter" for Meta. To turn its massive user base into a financially beneficial product, WhatsApp needs to increase its corporate clientele. Mutual conversations between companies and customers are charged in the form of a few cents per exchange, varying based on the country and type of chat.
For many years now, Alice Newton-Rex, WhatsApp's product director, has observed people striving to establish connections to businesses via the app. She made these remarks during an interview with CNBC and pointed to India and Brazil as prime examples of countries where the wholesale advertisement of WhatsApp numbers could be seen in store windows. Newton-Rex went on to explain how WhatsApp is used in these countries to, among other tasks, book Uber rides and browse Netflix movie suggestions. The product director first joined WhatsApp four years ago, leaving behind a high-level post at London's WorldRemit. This marked what would soon become an explosive growth in the number of product managers employed by WhatsApp, from 15 to 90. Her team currently strives to unlock the potential of the app, as envisioned by Mark Zuckerberg. Newton-Rex acknowledged the involvement of the CEO in WhatsApp's business process and its future roadmap. With its wide reach and ease of use, WhatsApp has become particularly popular in countries such as Brazil, India, and Indonesia-places that, in the past, had all but little telecommunications infrastructure and, thus, could not afford proper communication. This is something that the app has since changed, Newton-Rex remarked, with messages and phone calls no longer exorbitantly expensive. She touched upon this notion of universality when comparing WhatsApp to oxygen, in terms of its indispensability.
Analysts and investors have long been uncertain about the actual worth of WhatsApp to Meta. The corporation does not give out information regarding the size of the app's income, but Nick Lane of Mobilesquared estimates it to be among $500 million and $1 billion, only amounting to a small fraction of the business’s overall sales. In comparison, this year Debra Aho Williamson of Insider Intelligence believes Instagram will produce $40 billion in profit. Williamson jokingly commented, “Facebook purchased WhatsApp nearly nine years ago — it has a huge amount of users, but where’s the money? We’ve been watching this for many years, saying, 'OK, folks!'” The problem behind the lack of revenue goes all the way back to when the app was created. In a 2012 blog post, Koum and Acton made clear that they detested the advertising industry, arguing that “no one wakes up excited to see more advertising, no one goes to sleep thinking about the ads they’ll see tomorrow.”
In the years after the Facebook deal, Koum and Acton reportedly had disagreements with executives over data privacy and monetizing WhatsApp. Subsequently, Acton left in 2017 followed by Koum a year later.Considering privacy and moral issues, the core feature of WhatsApp as an encrypted platform for people to exchange private messages is not beneficial to advertise. After all, would a person welcome McDonald's promotions beside messages from family?However, Facebook has been dependent on ads as its main source of income, even with its expansion into consumer gadgets and the metaverse, including the charge for companies to send messages over WhatsApp.Meta began the WhatsApp Business app in 2018, providing businesses the opportunity to talk to customers with verification of accounts and features in the app. Now, it has increased four-fold to 200 million monthly active users.Small firms can use the app for free, or dependant on the nation, pay a monthly subscription to construct a WhatsApp website or to access a corporate account on up to 10 devices. Bigger corporations may purchase more comprehensive messaging plans and features on the WhatsApp Business platform.With the higher-level service, Meta charges per conversation, with the fee varying from one country to another. In Brazil, for example, authentication conversation with one-time passcodes may cost 3.15 cents, while marketing conversations detailing promotions or deals may cost 6.25 cents.As published in the 2021 annual report, Meta noted the 12% increase in revenue for its ‘Family of Apps-other revenue’ segment which contains the WhatsApp Business platform and other incomes such as net fees acquired from developers using its payment system, totalling $808 million in 2022.Whilst it is not possible to post online ads on WhatsApp, companies can buy a special ‘click-to-message’ advertisement which is now the centre of WhatsApp’s business model. This redirects Instagram and Facebook consumers to WhatsApp to commence a direct conversation.
Meta is expanding its use of a tactic. Zuckerberg previously mentioned that the click-to-message ads functioning across WhatsApp, Messenger and Instagram have created around $9 billion in yearly revenue, with the majority of those profits coming from the Messenger app. Last year, he said that such ads in WhatsApp, in particular, had hit a rate of $1.5 billion, going up 80% from the year prior. Meta clarifies that this falls under the umbrella of total ad revenue, neither WhatsApp nor Messenger having exclusive control of it. During Meta's Q1 earnings call for 2023, Zuckerberg stated the click-to-message ads had reached a $10 billion annualized revenue mark, noting that "paid messaging on WhatsApp – has grown by 40% quarter over quarter" but not disclosing the monetary value.Furthermore, in June, Meta launched Channels – similar to one in the Telegram app – as a way for persons/organisations to communicate with a vast amount of people. It's only in a few countries currently, such as Colombia and Singapore, but the company could increase its usage and make income from them. Newton-Rex suggested small fees may be charged to hear from specific news outlets or celebrities, as well as promoting the channel in the company's directory. Channels works by broadcasting, nor encryption, making it possible for companies to promote without being intertwined with confidential messages.They are pondering various monetization chances now, Newton-Rex said, while no decision has been made.
Despite Meta's efforts to increase the usage of WhatsApp, the U.S. remains a hard nut to crack given that it forms a key part of its parent company's revenue. The latest quarter witnessed North America (consisting of the U.S. and Canada) account for 45% of Meta's revenue. Nevertheless, the penetration rate of WhatsApp users had only reached 21.8% in the U.S. compared to the countries like Spain, Italy and Argentina at 80%. Even though, Jaime Newton-Rex, Meta's director of international markets, considers North America to be the "fastest-growing" region for the same. Immigrants having family in other countries and the encryption features are widely in vogue for the app's patrons in the U.S. With the data privacy issues, it still has a good reputation.Meta's focus on Generative Artificial Intelligence (GAI) is also being talked about; backed by company CEO Mark Zuckerberg's announcement about chatbots being embedded in messaging tools such as WhatsApp. Newton-Rex believes that GAI could help develop more business applications. The global business messaging space is currently estimated to be worth $32 billion and is dominated by SMS. WhatsApp provides novel ways for companies to communicate with their customers, such as hosting the entire menu for a restaurant.However, it is expected that there won’t be an abrupt rise in the usage of WhatsApp in the U.S. in the near future, as per the opinion of Insider Intelligence analyst Lizzy Williamson.
Comments