WhatsApp shifts focus to customer service features for revenue generation

By Rahul Vaimal, Associate Editor
  • Follow author on
WhatsApp Image
Representational Image

It is through advertising that the US-based social media giant Facebook makes almost all of its revenue. But with its subsidiary and messaging platform WhatsApp, it is taking a different approach.

The most prominent messaging service in the world is moving more aggressively into customer service features, including a pay-to-message option for businesses and says it focuses on enterprise tools, not ads. Late last year, WhatsApp paused plans for targeted ads, surprising those who believed it would follow in line with its parent company.

“Our focus has been on the business messaging products,” says Matt Idema, WhatsApp’s chief operating officer. He said WhatsApp still envisions ads inside Status, a feature on the app similar to Facebook’s Stories, at some point.

WhatsApp recently unveiled an update targeted at businesses that use its API, a software interface that helps businesses to manage message threads outside the app with their customers, perhaps via a third-party dashboard.

WhatsApp currently charges certain firms a small fee to give users details such as receipts and confirmation updates via the app instead of email.

Now, in the expectation that more of them will sign up for the API, WhatsApp will provide more API features, including free storage to host a business’s messages. Mr. Idema says that 175 million of the 2 billion-plus WhatsApp users interact with a business on a daily basis on the app, an indication that WhatsApp is based on a feature that people care about. Tens of thousands of companies use the API, though WhatsApp’s revenue is not disclosed by Facebook.

The high level of encryption has been part of WhatsApp’s appeal, ensuring messages are never usually stored on Facebook servers or read by the company. WhatsApp is also committed to not using them to improve ad targeting by promising to store a company’s messages only if they ask, a spokesperson says.

For years, Facebook has worked to find a way to turn its immensely popular messaging apps into a profitable business. A few years back on Messenger, its other standalone chat app, the company actively promoted automatic messaging bots, but that use case never took off. It also positions ads inside Messenger, but analysts do not consider it to be a big part of the revenue of Facebook.

A blend of commerce and customer service is the latest strategy. The only way that WhatsApp makes money today is by charging companies to send messages via the API. But Facebook has invested in a variety of international companies to secure WhatsApp partners, including Jio Platforms in India, as it establishes commerce and business features in those markets. For example, in India, many small business owners use WhatsApp instead of a website, relying on the service to communicate with customers and view catalogs of products.

WhatsApp is trying to broaden that feature, too. A Facebook Shop on WhatsApp, a product catalog that operates across all applications of the company, including Instagram, can now be promoted by retailers. Mr. Idema sees shops as a progression of sorts from the current catalog feature of WhatsApp, saying it would enable retailers to manage a digital storefront from all apps of Facebook rather than just on WhatsApp.

Payments will also be included in the next stage of WhatsApp’s plan along with allowing customers to purchase items directly inside the app. In a number of countries, including India and Brazil which are WhatsApp’s biggest markets, those plans have hit regulatory snags, adding to the challenge of making money through private messaging.

On Thursday, October 29, Facebook will announce its earnings.