Charging for use of WhatsApp features
Facebook (FB) has figured out how to make money from its messaging app (application) WhatsApp, for which it paid nearly $22.0 billion to acquire. WhatsApp is one of Facebook’s Web properties whose revenue potential has not been fully exploited. The others are Messenger and Instagram, a direct competitor of Snap’s (SNAP) Snapchat.
According to WhatsApp’s COO (chief operating officer) Matt Idema, Facebook will monetize the app by charging for use of certain business features. While Facebook intends to keep WhatsApp free for individual users, it could charge companies to access certain features built into its business tools. Facebook has introduced business tools that enable companies to provide customer support through WhatsApp.
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Diversifying revenue streams
The chart above shows WhatsApp’s monthly active users. Although advertising is Facebook’s primary source of revenue, the company has resisted serving ads on WhatsApp. Facebook’s view of monetizing WhatsApp through paid business features could help it accelerate diversification of its revenue streams and break over-reliance on advertising sales.
The company looks to online advertising for nearly 99.0% of its revenue, yet competition in the industry is getting more intense.
Facebook and Alphabet’s (GOOGL) Google, the two online advertising giants, face growing competition from Twitter (TWTR), Snap, Yelp (YELP), and Verizon’s newly minted media and advertising entity called Oath, which is comprised of AOL and Yahoo assets.
The threat from these small rivals has heightened with signs that some marketers want a third force to keep the influence of Facebook and Google in check.