When Facebook purchased WhatsApp for $19 billion back in 2014, it's view was that it would follow its traditional monetization strategy for the popular messaging app, which would eventually see it insert ads into certain elements and generate significant income from WhatsApp users.
But with WhatsApp, that approach hasn't worked out. Earlier this year, Facebook confirmed that it had abandoned its plans to push ads into WhatsApp Status, the Stories-type feature of the app, while other attempts to include paid promotions had also largely fallen flat. The privacy focus of the app has made it much more difficult for Facebook to monetize - so while WhatsApp has a massive presence, with 2 billion active users worldwide, maximizing its business potential has proven somewhat problematic.
So now, Facebook's taking a new approach. Today, WhatsApp has announced that it will focus on expanding its in-app shopping options, and give brands new tools for managing their interactions to maximize its business potential. But it will also start charging fees for some advanced functions.
Here's what's been announced:
First off, WhatsApp says that it's seen a big increase in business activity in 2020.
"WhatsApp has become a simple and convenient resource in this time. More than 175 million people every day message a WhatsApp Business account. Our research shows people prefer to message a business to get help and they’re more likely to make a purchase when they can do so."
WhatsApp commerce has been a big focus in the Indian market, where Facebook is working to build its presence. It's slowly expanding the use of WhatsApp Pay in the region, and the acquisition of eCommerce platforms like Meesho give Facebook more in-stream purchase options, catering to this rising demand.
Now, WhatsApp's looking to build on this:
"We will expand ways for people to check out available products and make purchases right from a chat. We also want to make it easier for businesses to integrate these features into their existing commerce and customer solutions. This will help many small businesses who have been most impacted in this time."
WhatsApp posted this promotional video of its coming in-stream purchase tools:
This is how easy we think messaging a business should be - seeing a store’s catalog in a chat, adding an item to your cart, placing your order and getting fast responses to questions. We are looking forward to bringing these experiences to more people on WhatsApp! pic.twitter.com/nkJyC3dOzg— WhatsApp Inc. (@WhatsApp) October 22, 2020
The development of eCommerce tools within WhatsApp makes sense, and could eventually provide an avenue to monetization by taking a cut of sales generated. But right now, it needs to first establish greater demand, which it's working to do with this renewed focus.
In addition to this, WhatsApp's also looking to provide a new option for businesses to manage their WhatsApp messages via Facebook's hosting services.
"We’re announcing a new way for businesses to store and manage their WhatsApp chats with customers using Facebook’s secure hosting infrastructure which will roll out early next year. This will make it easier to onboard to WhatsApp Business API, allow them to respond to WhatsApp messages faster, keep their inventory up to date and sell products through chats."
That will provide more options for managing your WhatsApp exchanges, including via remote workers on different management platforms. However, because you're essentially adding a middle step into the WhatsApp messaging process, that will impact the platform's end-to-end encryption process.
"If a business chooses to use a third-party vendor to operate the WhatsApp Business API on their behalf, we do not consider that to be end-to-end encrypted since the business you are messaging has chosen to give a third-party vendor access to those messages. This will also be the case if that third-party vendor is Facebook."
As such, WhatsApp will include new notifications on consumer-to-business exchanges conducted through Facebook hosting.
That'll provide more flexibility in management, and transparency in communications. But as noted, it could also come at an increased cost:
"We will charge business customers for some of the services we offer, which will help WhatsApp continue building a business of our own while we provide and expand free end-to-end encrypted text, video and voice calling for more than two billion people."
What, exactly, WhatsApp will begin charging for, and how much, is not clear at this stage, but it looks like Facebook will be seeking to monetize WhatsApp by charging small fees for merchants, as opposed to pushing ads in-stream.
Which may not be the worst trade-off, however it does depend on the costs involved, and how WhatsApp scales its options in this respect. It's somewhat odd that the company has announced coming charges with no specific detail. But it has flagged them, and as brands consider their next steps in WhatsApp commerce, they will now need to factor in that, at some stage, these could come at a cost.
Will that slow take-up? Probably not. WhatsApp is the biggest messaging app in the world, and is the dominant platform in several developing markets. Its presence is so significant that brands will no doubt be happy to pay a fee to expand their reach, and if the costs are relatively low, that should still keep the barrier for entry manageable for smaller enterprises looking to get in and compete.
Really, Facebook's hoping to make WhatsApp the essential app, for almost everything, in these regions. The template for this approach is how WeChat has become the critical app for Chinese citizens, keeping them digitally connected to the world around them, facilitating purchases, bill payments, taxi bookings, etc.
If Facebook can make WhatsApp that core connector in India and Indonesia, that could be massive.
This is where WhatsApp is headed, and with these coming additions, it could well be on the right track.