Facebook Inc (NASDAQ:FB) stock might look like it’s in choppy waters right now, but investors should look a little further. The company’s recent decision on its popular messaging app could bring huge monetization opportunities and might put Facebook in direct competition with Apple Inc. (NASDAQ:AAPL) in some fields.
This Could Be a Game-Changer for FB Stock
Facebook closed its $19.0-billion landmark acquisition of WhatsApp in 2014. Now, the company says that it will stop charging the $0.99 annual fee from users of the widely adopted messaging service, making WhatsApp a free app. (Source: “Making WhatsApp Free and More Useful,” WhatsApp Blog, January 18, 2016.)
WhatsApp had always been free for the first year before this announcement, but it used to charge a $0.99 fee annually after the first year. Although the fee is nothing substantial, it did make things difficult for users who don’t have debit or credit cards, but who wanted to stay connected to their families and friends. By removing the annual fee, the popular app owned by Facebook could now reach an even broader audience.
Since users won’t be paying for the service anymore, you’d imagine that WhatsApp will start running ads. But that’s not the case here. Instead of running third-party ads, the app will try to let users communicate with businesses and organizations that they want to hear from.
Right now, it might not be obvious as to how big of a move this is and you might wonder whether this will allow Facebook to successfully monetize WhatsApp. However, all you need to do is look towards the East to see proof. A company in China pursued a similar strategy and has enjoyed tremendous success.
FB Stock: Learning from the East
For those who are unfamiliar with China’s Internet business, the app I’m talking about is “WeChat,” which was created by Chinese Internet giant Tencent Holdings Limited. To give you some idea as to how popular this app is, by the third quarter of 2015, WeChat had a whopping 650 million monthly active users (MAUs). (Source: “Number of Monthly Active WeChat Users from 2nd Quarter 2010 to 3rd Quarter 2015,” Statista, last accessed January 21, 2016.)
Note that part of the success of WeChat was due to its nature as a platform rather than being just a messaging app. WeChat contains millions of third-party apps. Businesses and organizations can make an app known as an “official account.” Through these official accounts, users can access APIs for features such as messaging, location services, and payments.
The appeal of being a platform is that users don’t need to leave the app to communicate with businesses. Instead, WeChat users can hail a taxi, manage bills, and even make purchases from vendors all through the WeChat app.
Now Facebook is trying to do the same thing—connecting with businesses and organizations. In WhatsApp’s announcement, the company says users could be “communicating with [their] bank about whether a recent transaction was fraudulent or with an airline about a delayed flight.”
I believe that Facebook will eventually add the payment feature to WhatsApp. I mean, the social network giant already supports payments on its “Messenger” app. Having this feature on WhatsApp is in line with the plan to connect businesses to WhatsApp’s nearly one billion users and could provide tremendous monetization opportunities. Moreover, users will also be able to transfer money between family and friends without having to leave the app.
If the company were to take a step further, it could expand its payment service to physical stores. That is, Facebook could launch a full-fledged digital wallet for WhatsApp, putting it in direct competition with Apple’s “Apple Pay” and Alphabet Inc’s (NASDAQ:GOOG) “Android Pay.”
Note that WeChat is already doing that: last time I was in Beijing, I paid for my groceries with WeChat’s digital wallet at the cashier.
The Bottom Line on FB Stock
Of course, the plan is just starting at WhatsApp, but given the success story of WeChat and Facebook’s impressive track record, monetizing its most popular messaging app should only be a matter of time. And when that time comes, FB stock could get a huge boost.