Facebook bets on messaging … but where will the money come from?

The Facebook News Feed is a major part of modern culture. The monetization was simple: Users give their attention and advertisers provide the revenue.

However, Facebook is evolving. Mark Zuckerberg announced at F8 that the future of Facebook is private messaging. So it stands to reason the company will find ways to monetize its Messenger and WhatsApp properties. Zuckerberg recently spelled out his vision for Facebook to transition from a “digital town square” into a “digital living room.”

“Today we already see that private messaging, ephemeral stories, and small groups are by far the fastest growing areas of online communication,” he wrote in a blog post in March.

Facebook will need to make money from these growing areas to meet future revenue targets. In 2018, Facebook grew revenue by 37%, or $15 billion, to $55 billion. (To put that $15 billion growth in perspective, Salesforce, the B2B cloud behemoth, did just over $10 billion in revenues in fiscal year 2018.)

To grow at a similar pace in 2019, Facebook must find $20 billion in growth. So where will it come from?

WhatsApp, with over 1.5 billion monthly active users, and Messenger, with 1.3 billion monthly active users, present a huge opportunity for Facebook to monetize billions of private messaging interactions each month. But how will they do that without alienating users?

The first part of that answer lies in allowing only trusted businesses to market within Messenger and WhatsApp, and only if users opt into these interactions. Just like we have a circle of friends we trust, there are businesses in this circle — a neighborhood coffee shop or a favorite yoga studio. Consumers prefer messages from small businesses they identify with. In fact, most people even appreciate messages from large companies, as long as they opt into these conversations and the messages are useful and relevant. For now, when Facebook allows marketing within Messenger, companies must adhere to strict guidelines on content and frequency. For example, Facebook’s 24 + 1 policy states that if a customer has not responded to a message in the last 24 hours, a marketer may only send one follow-up message and then must stop communicating. For consumers, this is essentially an automatic opt-out, something we all wish email had adopted years ago.

The second way Facebook could make money off of messaging is to encourage more in-message purchases and find a way to monetize these transactions that’s fair and transparent for both buyers and sellers. Though it’s already possible to purchase products and services directly in WhatsApp and Messenger, it’s not yet common practice for most consumers. But one look at China and you can see where in-message transactions are headed; trillions of dollars of commerce is transacted on China’s WeChat each year, making it one of the largest payment processors in the world. Being the dominant platform upon which small business commerce takes place is an enviable place to be and one that will lead to no shortage of monetization ideas.

Today, Facebook doesn’t generate significant revenue from its messaging apps, but Messenger and WhatsApp are already becoming must-have tools for every small business. Just like in personal relationships, messaging will become the main way businesses interact with their customers — from marketing to customer service to transactions. Facebook’s position as the provider of two of the world’s largest messaging platforms is a pivotal one that will surely present monetization opportunities down the road. For example, Facebook’s recent introduction of a product catalog feature for businesses on WhatsApp is a harbinger of the commerce to come.

The future of social communication is here and it’s not an endless feed of updates. It’s purposeful discussions in closed, trusted groups. Facebook knows this and is choosing perhaps to disrupt itself. It’s taking baby steps to monetize its two mega messaging platforms, WhatsApp and Messenger. Allowing users to opt into conversations with trusted businesses and encouraging in-message transactions are Facebook’s first forays into turning Messenger and WhatsApp into powerful marketing platforms.

As one of the earliest proponents of Messenger marketing, we see the potential of businesses and consumers connecting through conversations, and we’re sure Facebook sees this too.

Mikael Yang is CEO and co-founder of ManyChat, a marketing platform for Facebook Messenger.