Facebook’s Making A Big Change To Its Plans To Monetize WhatsApp

Facebook’s Making A Big Change To Its Plans To Monetize WhatsApp

Mark Zuckerberg is making an about face(book) on WhatsApp. As recently as 14 months ago, WhatsApp’s management said advertising would be the “primary monetization mode for the company.” But now, plans for ads in WhatsApp are on hold, the team that was working on advertising has been disbanded, and their code has been deleted, according to a report from The Wall Street Journal.

Facebook (NASDAQ:FB) was planning to start showing ads in WhatsApp Status — its version of Instagram Stories — this year, previewing a prototype in May. The company is still holding the potential for ads in Status in its back pocket, but there’s no longer a timeline for the feature’s release.

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After acquiring the messaging app for $19 billion in 2014, investors may be wondering how Facebook plans to make money from the service now that it’s grown to over 1.5 billion users.

The lost potential of Status ads

Let’s take a quick look at what Facebook is giving up.

The best comparable for the potential of WhatsApp Status ads is Instagram Stories. Both features have roughly the same number of users, but Instagram’s users are more heavily concentrated in the valuable North American market.

Facebook doesn’t disclose revenue for Stories, but estimates peg the number as high as 10% of Facebook’s total ad revenue. That could be as much as $7 billion for 2019. Instagram Stories ads have only been broadly available for three years.
The opportunity for WhatsApp might not be as big. As mentioned, Instagram users are more heavily concentrated in the U.S. and Canada where Facebook’s average revenue per user (ARPU) was $34.55 in the third quarter, while WhatsApp’s user base is bigger in emerging markets like India, Brazil, Indonesia, and Russia. Facebook’s ARPU in Asia-Pacific was less than 10% of its U.S. and Canada user monetization, and it was even lower in the “rest of the world” reporting segment. What’s more, it’s not clear if users are as engaged on WhatsApp Status as they are on Instagram Stories, so there might not be as many advertising opportunities.

Additionally, marketers’ ability to target ads on WhatsApp may not be as good as on Instagram. WhatsApp is, by its nature, more private. Instagram is a place where users practically broadcast their interests. And while Facebook may be able to use existing user data from its other apps for some, many WhatsApp users haven’t connected their Facebook accounts to their WhatsApp accounts.

So, the potential for WhatsApp Status ads might not be too high — maybe $1 billion or $2 billion in annual revenue built up over the next few years. Analysts expect Facebook to generate $86 billion in revenue this year, so the impact is minimal.

Source:-ibtimes 

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