Ever since Facebook (FB) - Get Report paid about $22 billion to acquire WhatsApp in 2014, the question of how it would monetize the world's biggest mobile messaging platform has loomed large. Today, we finally got some answers.
WhatsApp, which earlier this year ditched the $1 per year subscription fee it was charging in some markets, announced today it's changing its terms of service to potentially allow businesses to communicate with users. Cited examples include "order, transaction, and appointment information, delivery and shipping notifications, product and service updates, and marketing." CEO Jan Koum mentioned in January WhatsApp plans to test support for business accounts.
The company also disclosed it will now share phone numbers with Facebook proper to help the latter "offer better friend suggestions and show you more relevant ads." At the same time, WhatsApp promises not to show third-party banner ads, or to "give your phone number to advertisers."
The changes, which raised eyebrows given Koum's past hostility towards advertising and data-collection, could eventually yield some major revenue opportunities, given WhatsApp now claims over a billion monthly active users (MAUs) and very high engagement rates among daily users. The service is effectively an SMS replacement for much of its base, something that leaves it well-suited for frequent interaction between users and the businesses that they rely on.
Facebook is already experimenting with letting businesses use Facebook Messenger to send "sponsored messages" to users they've already been in contact with; it's easy to see WhatsApp offering something similar. Payment and commerce services, which Asian messaging platforms WeChat and Line (LN) - Get Reporthave actively monetized, are another possibility.
And with Facebook's 2016 ad sales likely to be north of $25 billion, even a meager amount of data regarding a billion-plus WhatsApp users could be valuable for targeting purposes. However, the fact WhatsApp has a limited user base in North America, which still accounts for half of Facebook's revenue, lessens the value of its data.
In the near-term, it's unlikely WhatsApp's moves will produce the kind of revenue that would validate a $22 billion acquisition price, particularly given how cautious the company has been to date about sharing data or disrupting its minimalist user experience. But it's a start.