Why Mark Zuckerberg is talking so much about Whatsapp for business

WhatsApp is already widely popular with U.S. consumers. Now Meta Platforms is turning more attention to building its small business base.

The Facebook parent company launched WhatsApp Business in 2018 with free, simple tools to help small businesses keep in touch with customers, offering a way for them to directly interact, search for products and indicate purchasing interest. 

Soon the company will roll out a premium service to small businesses, and it’s doubling down on a newer advertising format called “click-to-message,” which allows consumers to click on a company’s ad within Facebook or Instagram and directly start a conversation with that business on Messenger, Instagram or WhatsApp.

These initiatives offer Meta the ability to boost advertising revenue, stay relevant with small businesses and gain incremental revenue from the premium services offered, analysts said.

Keeping more inside the Meta universe

Meta (then Facebook) bought WhatsApp in October 2014 for around $22 billion. Since then, industry watchers have been watching closely for signs the company plans to monetize the platform more. That time could now be coming.

“If I stay on any of the Meta properties and I’m communicating using Meta, asking questions, and buying — all within the platform — there is no signal loss, and it’s easier for Meta to tell the brand its return-on-advertising spend,” said Mark Kelley, managing director and senior equity research analyst at Stifel. “Signal loss is really what’s been impacting social media companies this year.”

WhatsApp will be the “next chapter” in the company’s history, Meta CEO Mark Zuckerberg recently told CNBC’s Jim Cramer. He noted that the company’s “playbook over time” has been to build services to serve a wide audience and “scale the monetization” after reaching that goal. “And we’ve done that with Facebook and Instagram. WhatsApp is really going to be the next chapter, with business messaging and commerce being a big thing there,” he said.

This messaging from Meta comes at a time of transition for the company and uncertainty among investors. The company recently reported an earnings and revenue miss and forecast a second straight quarter of declining sales. Meta Platforms shares have lost roughly half their value this year. Mark Zuckerberg is betting large sums of money, currently at a loss, on a future in which the metaverse will be a growth driver for the company. But with his bet on the metaverse as far as a decade out before coming to fruition, the Meta CEO has stressed that in the short-term it is WhatsApp that is among the initiatives to focus on for growth.

WhatsApp Business has two components. There’s the WhatsApp Business app for small businesses. There’s also the WhatsApp Business platform, an API, for larger businesses like banks, airlines or e-commerce companies. The first 1,000 conversations on the platform each month are free. After that, businesses are charged per conversation, which includes all messages delivered in a 24-hour session, based on regional rates.

With the free app, small businesses can communicate directly with customers. They can set up automated messages to respond to customers, after business hours, for instance, with information about the business, such as a menu or their company’s location. Businesses can use it to send product pictures and descriptions to customers as well as other information they might be interested in. At present, there’s no ability to pay through WhatsApp, but it’s a feature Meta is considering, a company spokesman said.

Premium features for small businesses — to be rolled out in the coming months — will include the ability to manage chats across up to 10 devices as well as new customizable WhatsApp click-to-chat links to help businesses attract customers across their online presence, the company said in its blog. 

“We think messaging in general is the future of how people are going to want to communicate with businesses and vice versa. It’s the fastest and easiest way to get things done,” the spokesman said.

Why Main Street business is a focus for the WhatsApp push

Analysts see the broad potential. “Messaging is an international forum that everybody uses on an ongoing basis. It’s massive and it’s growing,” said Brian Fitzgerald, managing director and senior equity research analyst at Wells Fargo Securities.

There’s considerable room for growth in the U.S., where WhatsApp is still a “a largely untapped resource by small businesses,” said Rob Retzlaff, executive director of The Connected Commerce Council, a non-profit organization that promotes small businesses’ access to digital technologies and tools.

That’s something Meta sees changing over time. “We are deep believers that that behavior will continue to grow all over the world,” said Sheryl Sandberg, the company’s chief operating officer, on its second-quarter earnings call on July 27. The company estimates that 1 billion users are messaging with a business each week across WhatsApp, Messenger and Instagram. 

The need for free and low-cost digital tools for small businesses is underscored by a 2021 report from The Connected Commerce Council. The report noted that about 11 million small businesses would have closed all or part of their business if not for digital tools that allowed them to continue to operate. 

One driver for Meta in promoting WhatsApp Business is advertising revenue. “Click- to-message is already a multi-billion dollar business for us and we continue to see strong double-digit year-over-year growth,” Sandberg said on the second quarter earnings call. Click-to-message “is one of our fastest growing ad formats for us,” she added. The company does not break out how much of the business comes from WhatsApp versus Messenger or Instagram.

Businesses like this format because it’s “an inexpensive way to interact [with consumers] that feels a little more personal,” said Stifel’s Kelley. What’s more, it also alleviates a problem caused by the privacy change Apple made to its iOS operating system last year. 

Say, for instance, a customer views a Facebook ad for a sneaker retailer and connects directly with the business through WhatsApp. “In a world where we’re trying to do more and more with less and less data, there’s no leakage here. Everything’s protected,” Fitzgerald said. “Nobody [else] in the world knows I bought these sneakers and there’s a direct business-to-consumer connection.” 

Moreover, by offering premium services, Meta could boost revenue, at least incrementally, Kelley said.

José Montoya Gamboa, owner of Malhaya in Mexico, who has been using the free business app for several years, said he plans to pay for the premium version when it becomes available because he likes the ability to use it on multiple devices.

But Geraldine Colocia, community manager at Someone Somewhere, a certified B Corporation that collaborates with hundreds of artisans around Mexico, isn’t sure. She’s been using the free version of the app for more than two years, and would consider paying for it, but the decision will turn on the actual features and the pricing, she said.