Will 2016 Be The Year Of Facebook Messenger?

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Facebook‘s (NASDAQ:FB)  “Messenger” crossed 800 million monthly users in 2015, inching closer to the 1 billion mark when, as per the company’s strategy, monetization of the app can begin. It also was the fastest growing app of 2015. [1] In 2016 Facebook plans to make “Messenger” the “Everything App” by ensuring that users can access almost all businesses and services via Messenger, making other apps irrelevant. The company also aims to make phone numbers irrelevant by ensuring that Messenger is optimized for voice and video calls in addition to sending text messages, sharing photos and making payments. By delinking this app from its core Facebook platform, the company is now allowing users to use Messenger without a Facebook account. [2]  We believe that, as the company focuses on innovations to make Messenger more useful, increased user adoption can make it a key revenue driver for Facebook.

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“Everything App” – Higher User Engagement, New Revenue Stream

Given Facebook’s high internet penetration, its goal to make “Messenger” the “Everything app” does not sound very ambitious. According to our estimates, Facebook’s global internet penetration is 55% (Read How Many Users Are There On Facebook’s Platforms And How Does This Compare To Internet), indicating that more than half of the world’s internet users are either on Facebook, Whatsapp or Instagram. With “Messenger”, the company is trying to create a one-stop place for all online needs of a user. It is working on ways to make it easier for users to interact with businesses or service providers to buy items, purchase airline tickets and talk to customer service using the Messenger App. These discussion threads on “Messenger” can then become the new apps, eliminating the need to download or login into other apps. Facebook’s goal is to make ” Messenger”  the one stop place for all online requirements of the user from shopping to services to social interactions and event planning.

The company is also working on its new virtual digital assistant, “M”. Powered by artificial intelligence, it will be rolled out on Messenger eventually bringing a whole new range of conveniences such as booking a restaurant and sending flowers to the app. (According to Facebook, testing of M is in its very initial stages.)  The company is also working on more innovative developments to be rolled out on Messenger.

Facebook’s strategy with its Messenger app appears to be to increase user engagement by providing features which prompt users to stay on its platform for all their requirements.  While the company does not appear to be looking at monetization of the Messenger App in the near term, it would present a huge revenue opportunity in future, just as do WhatsApp and Instagram. If Facebook succeeds in its plans of making Messenger ubiquitous, in addition to advertising, it can open up other monetization opportunities such as promoted accounts, subscription fees, etc.  Facebook believes in monetizing a platform once it crosses the 1 billion users mark and Messenger is inching towards this figure.  We believe the Messenger app can open a new revenue stream for the company in the long term and can be key in driving its future growth.

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Notes:
  1. Facebook Messenger Hits 800M Users: 2016 Strategy and Predictions, Techcrunch, January 2016 []
  2. Here’s to 2016 with Messenger, Facebook Newsroom, January 7, 2016 []