MENLO PARK: The acquisitions of messaging apps by Facebook and Rakuten have raised questions on whether these companies are paying for users they will subsequently find difficult to monetise.
Facebook, the social media giant, announced it was buying WhatsApp, which has 450 million users worldwide, in a deal worth at least $16bn. That makes the cost per customer around $35, but with the app predicted to reach 1bn users within a few years that cost could effectively halve.
One commentator, Benedict Evans of Andreesen Horowitz, a venture capital company, noted that the deal was not dissimilar to Google's purchase of YouTube. Evans added that Facebook's current market capitalisation would value its monthly active users at $140.
Japanese internet retailer Rakuten recently bought Viber, with around 300m users, for $900m. That works out at just $3 per customer, but even at that cost analysts doubted that Rakuten could make money. In the year to December, Viber reported $1.5m in revenues and an operating loss of $26.5m.
Nathan Ramler, an analyst at Macquarie, was quoted in the Wall Street Journal as saying: "The question is whether Viber can start to monetize its customers in the same way that LINE and WeChat have. We think it will be difficult to replicate those successes."
Facebook faces a bigger mountain in that WhatsApp has built its success on avoiding advertising, the obvious route to user monetisation, and other options such as in-game apps. It charges download or subscription fees to users and does not track them or retain their data, a policy which would have to change were Facebook to pursue the advertising route in future.
Announcing the deal, WhatsApp founder Jan Koum said that growth, not monetisation, would be a priority, while Facebook CEO Mark Zuckerberg added: "I don't personally think ads are the right way to monetise messaging systems."
We Are Social, the digital agency, suggested that the company could instead explore customer service options: "Our take on this is that monetising real-time customer service offerings for brands – ie WhatsApp as an always-on, large-scale mobile support channel – would be a great place to start."
A recent Warc Trends Snapshot, The Rise of Social Messaging Apps, made a similar point, sugesting that marketers needed to determine the exact role these apps ought to perform. Options included customer-relationship programmes, the distribution of offers, qualitative research, or as customer service centres.
With some analysts suggesting that younger age groups are defecting from Facebook to other channels, the acquisitions of WhatsApp and Instagram could be seen as moves to tackle this issue. WhatsApp also gives Facebook more reach in emerging markets.
Rakuten has followed a similar path, investing in Pinterest and buying Viber, although as an ecommerce business its interest is less in advertising than driving customers to its site. Ian Maude of Enders Analysis, speaking to the BBC, expected that it would use Viber to promote products such as games to the predominantly younger users of the messaging app.
Data sourced from Wall Street Journal, We Are Social, BBC, Benedict Evans; additional content by Warc