WhatsApp Outlines Future Payday From Users Messaging With Businesses
By Jeff Horwitz
After years of searching, Facebook Inc.'s encrypted messaging
platform WhatsApp says it has a plan to make money from the
services it provides at no cost to more than two billion users.
On Thursday, the messaging service said it will soon give
merchants the ability to store, analyze and manage their WhatsApp
communications with customers Facebook's on company servers.
Currently businesses must arrange to store and handle such data for
The hosting services will eventually be accompanied by new
options for businesses to market their products via WhatsApp
catalogs and through Facebook's shops and checkout carts. WhatsApp,
which charges businesses for certain types of customer
interactions, would profit from the embrace of those tools by
The focus on facilitating user-initiated purchases and customer
service through messaging stands in contrast to the core Facebook
business model of selling targeted ads. WhatsApp didn't provide
details of the timeline for the new business services or any
financial projections, but Matthew Idema, WhatsApp's chief
operating officer, said in an interview that the company believes
it could produce meaningful profits for Facebook.
"Hundreds of billions of dollars are spent every year by
businesses to support customer service," Mr. Idema said. "The
opportunity is big and different from ads."
Facebook bought WhatsApp in a $22 billion acquisition in 2014
that has yet to pay financial dividends. The social-media giant's
plan to monetize WhatsApp through business messages follows an
abandoned attempt to force its core advertising business upon the
encrypted messaging app, which was built without the data
collection and targeting capacities that drive both Facebook and
The decision to focus WhatsApp on commercial interactions
reflects the way the service is used by most of its users around
the world. In the U.S. and many European countries, WhatsApp is
used largely for interpersonal communications. But many users in
developing nations -- who are the majority of WhatsApp's users --
have also adapted the platform to commerce and customer service --
and the company has sought to accommodate them.
More than 175 million people message WhatsApp business accounts
every day, according to Mr. Idema, who says the medium has
advantages for both consumers and businesses when compared with
phone calls and emails. If WhatsApp can render itself as an
indispensable channel for sales, it would be in a position to
charge minuscule sums -- perhaps fractions of a penny -- to
businesses every time they interact with customers on its platform.
Given WhatsApp's scale, such small fees could rapidly add up.
WhatsApp has long cultivated a reputation for stridently
protecting its users' privacy. Pursuing these new e-commerce
relationships will require WhatsApp to make some carve-outs for
WhatsApp users' communications with businesses will still be
fully encrypted, but planned integrations with Facebook's other
platforms mean some details of a WhatsApp user's shopping habits
will likely be shared with Facebook's other platforms, feeding the
parent company's overall behavioral data-collection operation.
Storing any data about the substance of a user's activities
would be new for WhatsApp. The company has long maintained that the
best way to protect users' data from hacks, subpoenas and other
snooping was to store as little of it as possible.
Rishi Jaluria, an analyst for D.A. Davidson & Co, said
WhatsApp's plan to make money is plausible and in line with
features that are already being rolled out with Facebook's
Messenger product. WhatsApp's attempts to make money from
businesses' communications with consumers have so far failed to add
up to much, he said, because they have focused on basic customer
service, such as the distribution of electronic airline tickets via
"It sounds like this might take it further into the marketing
side," he said. "The strategy makes sense as long as they toe the
line on privacy."
WhatsApp will have to rethink how commerce-related
communications fit with its stance on privacy and encryption. The
platform will notify users that such communications are being
stored by businesses -- possibly on Facebook-owned servers -- Mr.
Idema said. And the shopping-related features of the app will be
visibly differentiated from user-to-user messaging.
Mr. Idema, who joined WhatsApp from Facebook in 2017, said
neither WhatsApp nor Facebook will be using the messaging data
hosted by Facebook for its own purposes. Updates to WhatsApp's
terms of service will make that commitment formal.
"The hosting service is meant to host at the instruction of the
business, and that's it," he said.
The success of enterprise software companies like Twilio --
which has built a $45 billion market value out of automation
services for the handling of emails, phone calls and messages --
provides a template for how such a business could produce
meaningful revenue for a company of Facebook's vast size, Mr. Idema
said. Rather than competing with such enterprise software
companies, WhatsApp would charge Twilio's customers for access to
The updates now promised by WhatsApp will "make it possible to
bring many more Twilio customers onto the WhatsApp Business API in
a matter of minutes," said Simon Khalaf, San Francisco-based
Twilio's general manager of messaging.
--Aaron Tilley contributed to this article.
Write to Jeff Horwitz at Jeff.Horwitz@wsj.com
(END) Dow Jones Newswires
October 22, 2020 09:15 ET (13:15 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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