Facebook’s Plan for Messenger Sounds Familiar

Facebook’s Messenger monetization strategy

On Facebook’s earnings call last week, Mark Zuckerberg outlined, for the first time, a medium-to-long-term strategy for monetizing Facebook Messenger and WhatsApp. I’ll quote here from the earnings transcript provided by Seeking Alpha:

So the playbook that we’re going to run with Messenger and WhatsApp is kind of similar to how we thought about building a business in Facebook and News Feed, where if you go back to 2006 and 2007, there were a lot of people who were kind of encouraging us to just put banner ads and kind of inorganic content into the experience, and what we decided was that over the long term, the ads and monetization would perform better if there was an organic interaction between people using the product and businesses.

So instead of focusing on ads first, what we did was we built pages, and we made that free, that way as many businesses as possible could get into the network. And we built insights to make it so that businesses knew how they were driving business when they used pages for free and could post them to News Feed. And then on top of that whole ecosystem, we then had the opportunity to build what has turned into a News Feed business that we’re really proud of, right. That we think is driving a lot of value and good content for people who are using the platform and helping a lot of businesses find customers and sell their products and grow overall.

Messaging, I think, is going to be pretty similar, right? Where right now some people in WhatsApp use the service in order to message businesses, Messenger is, I think, more people-to-people today. We’re working on a lot of different things that make it so that people can get value from interacting with businesses. We launched some of them at F8. We have a number of other things that we’re working on across Messenger and WhatsApp. But the long term bet is that by enabling people to have good organic interactions with businesses, that will end up being a massive multiplier on the value of the monetization down the road when we work on that and really focus on that in a bigger way. So we’d ask for some patience on this to do this correctly, and the game plan will be more similar to what we did in Facebook with News Feed.

What’s interesting is Zuckerberg positioned this as following the strategy Facebook itself used for monetizing the core experience and the News Feed. But when it comes to these messaging apps, Zuckerberg’s strategy perhaps mimics even more closely a major aspect of how Asian messaging apps have monetized their users. A couple of months ago, I wrote about these Asian messaging apps and how they make money. The reality is, most of their money doesn’t come from person-to-person messaging at all but from other products that leverage the fact users are spending lots of time in these apps and like to communicate in this way.

How Asian apps use the strategy today

Each of the three major Asian messaging apps I discussed in that post used this strategy in slightly different ways. Tencent’s Weixin (WeChat) platform has what are known as Official Accounts, of which it now has several million. These accounts are used by companies, government departments, and the like, and users can interact with them in a similar way to the way they interact with other users. But they can also book appointments and otherwise interact much as users in other markets might via phone or email. In this scenario, the businesses pay the fees associated with their public accounts. But celebrities also use the same service and some have experimented with paid premium subscriptions so fans get early or exclusive access to content (my understanding is that these are currently offered through third parties rather than WeChat itself, though they use WeChat’s payment mechanisms).

Korean platform Kakao’s equivalent feature is called Plus Friend. Companies pay to establish such accounts, which then allow them to push content to their followers. And again, celebrities were some of the earliest users of this feature, alongside companies and brands. Japanese app LINE uses the same Official Accounts terminology as WeChat for larger companies and had over 230 accounts earlier this year. But LINE also has a LINE@ option for small and medium-sized enterprises, of which over 370,000 had accounts. With the Official Accounts model, companies also get to offer sponsored sticker packs as a way of combining two different business models – company accounts and exclusive content.

An important difference for Facebook

When I wrote about those Asian messaging apps, one of the critical things I noted was that each is successful as a platform in large part because it captures a critical mass of users in the markets it serves (China for Weixin, Korea for Kakao, and Japan and handful of other markets for LINE). Only this critical mass allows the platform to be attractive both to users and to brands, companies, and celebrities in these markets (and the same groups overseas who wish to attract customers and fans in these countries). The big difference with Facebook is it’s not a regional play – both Facebook Messenger and WhatsApp now have significant market share in many different markets and Facebook, as a platform, has large portions of the online audience in many countries. As such, Facebook is uniquely positioned to make this model work on a multi-country basis in a way none of the Asian messaging apps really can, despite their best efforts. Just this past week, LINE’s management said it was retrenching somewhat to its core markets in Asia, having largely failed to grow elsewhere. If Facebook can effectively emulate the corporate account strategy of these Asian messaging apps, it could create a business worth many times what these individual country- or region-focused apps have, from this strategy alone.