Companies claim they love their customers. But are they willing to display that love by paying to speak directly with the people who buy their products? That’s what Facebook (FB), which is looking to make money on its WhatsApp messaging platform, is betting on.
The social media giant, which has more than two billion users on its core platform, believes companies will eventually want to contact its massive user base and this will translate into a significant revenue stream as WhatsApp functions as the toll collector. In other words, while Facebook stock is no bargain — after almost 50% gains since the start of the year — that doesn’t mean the company is done creating value. And it would be a mistake to part with this winner now.
Always in search for the next revenue stream, Facebook’s WhatsApp subsidiary, for which it spent $19 billion to acquire three years ago, began testing various business tools during the summer. These features, which allows businesses to communicate directly with customers to offer sales and support services, among other capabilities, will soon be ready for prime time, according to the Wall Street Journal, which interviewed WhatsApp’s chief operating officer, Matt Idema.
The business tools are currently being tested by business in various geographic regions, including Europe, India, Brazil and Indonesia, the Journal noted. In a blog post Tuesday, WhatsApp confirmed the arrival of these business features.
“We’re building and testing new tools via a free WhatsApp Business app for small companies and an enterprise solution for bigger companies operating at a large scale with a global base of customers, like airlines, e-commerce sites, and banks,” WhatsApp wrote. But the money-making blueprint is still being sketched out.
“We don’t have the details of monetization figured out,” Idema told the Journal.
Nevertheless, this news, amid the heated battle over digital advertising dollars with Alphabet’s (GOOG , GOOGL) Google, Snap (SNAP) and, to a lesser extent, Twitter (TWTR), should be well received by FB shareholders. It’s the first clear sign that Facebook is ready to recoup value from its massive WhatsApp investment. And it should help assuage fears about Facebook’s slowing growth rate as the management continues to reduce the amount of ads that appears on the core Facebook platform.
But with FB shares recently soaring to all-time highs, Wall Street has been eager to learn how much more runway does the social media giant have left, especially as Facebook’s core North American and European markets are approaching what analysts have called “full penetration.”
And this makes any new revenue WhatsApp’s business tools can generate in the quarters and years ahead even more critical to Facebook’s top- and bottom-line growth. It remains to be seen what that revenue will look like since WhatsApp is still in the early stages of figuring it out. But given the frequency with which Mark Zuckerberg strikes gold with each new idea, I’m not betting against WhatsApp’s success.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.