Does Facebook Finally Have A Monetization Plan For WhatsApp?

FB: Facebook logo
FB
Facebook

According to our estimates, Instagram and WhatsApp account for nearly 25% of Facebook’s (NASDAQ:FB) valuation, and once WhatsApp is monetized meaningfully we expect its average revenue per user to grow at a rapid pace and reach around $8 by the end of our forecast period.

This growth impacts Facebook’s valuation, and if the company is not able to monetize WhatsApp per our expectations, there could be a downside to our price estimate. For instance, if WhatsApp’s revenues remain stagnant at around $2 per user over our forecast period, there would be a nearly 10% downside to our price estimate.

Facebook was charging a small subscription fee to WhatsApp users, but this was discontinued last year.  It is also not likely to monetize the app through advertisements, which form the major source of revenues for its core platform as well as Instagram. However, the company now appears to be seriously looking at alternative ways to monetize WhatsApp. Recently, Facebook appointed Matt Idema as the COO of WhatsApp, and his key focus is likely to be monetization of the platform.

Relevant Articles
  1. Will Johnson & Johnson Stock Rebound To Its Pre-Inflation Shock Highs of $185?
  2. Should You Pick Eli Lilly Stock After A 4x Rise In Three Years?
  3. Down 9% This Year, What’s Next For Lululemon’s Stock Past Q4 Results?
  4. Down 14% In The Last Trading Session, Where Is Adobe Stock Headed?
  5. Will Higher Federal Government Spending, Gen AI Drive Digital Security Stocks Like CrowdStrike Higher?
  6. Up 30% In A Year Is FedEx Stock A Better Pick Over UPS?

Facebook plans to make WhatsApp a tool with which businesses can communicate with their consumers, and offer it as a better communication method compared to email and text messages. The company can charge a fee to businesses for using this service and monetize the platform.  This plan is similar to the company’s revenue generation strategy from its Messenger app; however, Messenger already has a few companies on board that are using it as a tool for customer service. Facebook wants to encourage businesses to use WhatsApp for messages such as a flight delay or a bank transaction, and eventually work on a plan where promotional messages from these businesses can be communicated to consumers. Since this would become a regular communication channel, these promotional messages would not translate into spam. With a strong user base of 1.2 billion, the company is now on the path to monetize this platform.

While targeting businesses to use WhatsApp for communication with consumers overlaps with Facebook’s strategy for Messenger, we believe there are several non-advertising ways in which WhatsApp could be monetized. Payments could be one potential revenue stream, and in-app purchases on the lines of WeChat could be another source of revenue. While the company has not announced a clear monetization path for the popular platform, we believe it is now focusing on creating revenue streams for the platform, which could have a significant impact on its valuation.

See our complete analysis for Facebook

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology