Why Mark Zuckerberg is talking so much about Whatsapp for business

The new Facebook Meta rebrand logo is seen on a smartphone in front of the Facebook, Messenger, Intagram, Whatsapp and Oculus logo in this illustrative image taken on October 28, 2021.

Donat Ruvic | Reuters

WhatsApp is already very popular among American consumers. Now Meta Platforms is devoting more attention to building its small business base.

Facebook’s parent company launched WhatsApp Business in 2018 with simple, free tools to help small businesses stay in touch with customers, giving them a way to interact directly, search for products and indicate interest in buying .

The company will soon launch a premium service for small businesses, and is doubling down on a newer advertising format called “click-to-post,” which allows consumers to click on a business’s Facebook ad or Instagram and directly start a conversation with that business on Messenger, Instagram or WhatsApp.

These initiatives give Meta the ability to increase advertising revenue, stay relevant with small businesses and earn incremental revenue from premium services offered, analysts said.

Keep more within the Meta universe

Meta (then Facebook) bought WhatsApp in October 2014 for about $22 billion. Since then, industry watchers have been watching closely for signs that the company plans to further monetize the platform. Now that moment could come.

“If I stay at any of the Meta properties and communicate through Meta, ask questions and buy, all within the platform, there’s no signal loss and it’s easier for Meta to tell the brand its return from the advertising. spend,” said Mark Kelley, managing director and senior equity research analyst at Stifel. “Signal loss is really what has hit social media companies this year.”

WhatsApp will be the “next chapter” in the company’s story, Meta CEO Mark Zuckerberg recently told CNBC’s Jim Cramer. He noted that the company’s “playbook” over time has been to build services to serve a broad audience and “scale monetization” after reaching that goal. “And we’ve done that with Facebook and Instagram. WhatsApp is really going to be the next chapter, with business messaging and commerce there a lot,” he said.

This message from Meta comes at a time of transition for the company and uncertainty among investors. The company recently reported a miss on earnings and revenue and forecast a second straight quarter of declining sales. Meta Platforms shares have lost about half their value this year. Mark Zuckerberg is betting huge sums of money, currently at a loss, on a future where the metaverse will be a growth engine for the company. But with his bet on the metaverse up to a decade away from coming to fruition, Meta’s CEO has stressed that in the short term, WhatsApp is one of the initiatives to focus on for growth.

WhatsApp Business has two components. There is the WhatsApp Business app for small businesses. There is also the WhatsApp Business platform, an API, for larger companies such as banks, airlines or e-commerce companies. The first 1,000 conversations on the platform each month are free. After that, companies are charged per conversation, which includes all messages delivered in a 24-hour session, based on regional rates.

With the free app, small businesses can communicate directly with customers. They can set up automated messages to respond to customers, after business hours, for example, with business information such as a menu or their business location. Businesses can use it to send product images and descriptions to customers, as well as other information that may be of interest to them. Currently, there’s no ability to pay through WhatsApp, but it’s a feature Meta is considering, a company spokesperson said.

The premium features for small businesses, which will roll out in the coming months, will include the ability to manage chats on up to 10 devices, as well as new customizable click-to-chat WhatsApp links to help businesses attract customers to through its online presence. the company said on its blog.

“We think messaging in general is the future of how people will want to communicate with businesses and vice versa. It’s the fastest and easiest way to get things done,” the spokesperson said.

Why Main Street business is a focus for WhatsApp push

Analysts see wide potential. “Messaging is an international forum that everyone uses on an ongoing basis. It’s massive and it’s growing,” said Brian Fitzgerald, managing director and senior equity research analyst at Wells Fargo Securities.

There’s considerable room for growth in the U.S., where WhatsApp is still “a largely untapped resource for small businesses,” said Rob Retzlaff, executive director of The Connected Commerce Council, a nonprofit that promotes small businesses’ access to digital technologies. and tools

This is something Meta sees changing over time. “We strongly believe that this behavior will continue to grow around the world,” said Sheryl Sandberg, the company’s chief operating officer, on its July 27 second-quarter earnings call. The company estimates that 1 billion users are messaging each week on WhatsApp, Messenger and Instagram.

The need for free and low-cost digital tools for small businesses is highlighted in a 2021 report from The Connected Commerce Council. The report noted that some 11 million small businesses would have closed all or part of their business if it weren’t for digital tools that allowed them to continue operating.

One of Meta’s drivers for promoting WhatsApp Business is advertising revenue. “Click-per-message is already a multibillion-dollar business for us, and we continue to see strong double-digit year-over-year growth,” Sandberg said on the second-quarter earnings call. Click-to-message “is one of our fastest-growing ad formats for us,” he added. The company does not say how much of the business comes from WhatsApp versus Messenger or Instagram.

Businesses like this format because it’s “an inexpensive way to interact [with consumers] this feels a little more personal,” said Stifel’s Kelley. It also alleviates a problem caused by the privacy change Apple made to its iOS operating system last year.

For example, say a customer sees a Facebook ad for a sneaker retailer and connects directly with the business via WhatsApp. “In a world where we’re trying to do more and more with less and less data, there’s no leakage here. Everything is protected,” Fitzgerald said. “No one [else] the world knows I bought these sneakers and there’s a direct connection between the company and the consumer.”

Also, by offering premium services, Meta could increase revenue, at least incrementally, Kelley said.

José Montoya Gamboa, owner of Malhaya in Mexico, who has been using the free business app for many years, said he plans to pay for the premium version when it becomes available because he likes the ability to use it on multiple devices.

But Geraldine Colocia, community manager at Someone Somewhere, a certified B corporation that works with hundreds of artisans in Mexico, isn’t sure. He’s been using the free version of the app for more than two years and would consider paying for it, but the decision will come down to the actual features and price, he said.

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