What’s On

Consolidation in social messaging: Expected but what next

Highlights
  • Rakuten agreed to buy Viber for USD 900 million last week; FB, in its most expensive shopping so far, is set to acquire WhatsApp for a total sum of USD 19 billion
  • WhatsApp competes with FB Messenger. Will FB merge the two or does it see growth coming from cannibalisation
  • "If FB’s acquisition of WhatsApp is its way to tackle players such as LINE or China’s WeChat head-on, then it is on the right track"
  • Efforts for monetisation cannot be delayed for too long. But it may not necessarily just be advertising-focussed.
  • Mobile commerce has taken on a new form via these players

‘Whoa’ — that was more or less the first reaction to Facebook’s announcement of acquiring social messaging app WhatsApp. It is not just the acquisition alone that attracted the reaction but also the USD 19 billion figure attached to it. If anyone thought good monies exchanged hands when Rakuten agreed to buyout Viber for USD 900 million last week, the FB-WhatsApp deal put the size of the messaging business in perspective.

“Messaging has reached a stage where it is not economically understandable,” remarked Rohit Dadwal, MD, Mobile Marketing Association APAC, and added, “After Viber’s sale for USD 900 million, this tops all deals in the recent past.”

For a while now, and companies from Asia have dominated in the space, stories on the growth and growth of social messaging apps have been discussed at length. Marketers have quoted examples on how replacing TV with messaging services in markets such as Korea, Japan or China changed the deliveries of a plan and raised expectations from such services. In that sense however, WhatsApp is different. The no-ad, no-gimmick policy meant a clean experience for users. A policy that may remind some of the early days of Facebook itself.

A key question that arises nonetheless is how FB would look to recover the USD 19 billion that it is investing in this deal. For many, the answer to that is not clear yet.

Compete or Complement
Advertising is the main revenue stream for Facebook. And social messaging apps have proved to be a platform that advertisers are keen to utilise. One point to consider is whether WhatsApp will lose growth rate, or number of users, if and when it changes its no-ad policy? The other point is that WhatsApp competes with Facebook Messenger directly. While cannibalisation has, in a way, helped media – digital and non-digital – brands in the past, would that be the case for Facebook too?

“I can’t see WhatsApp as a complement to FB’s current offering, as it is in effect, identical to FB Messenger. Any attempt to merge both platforms is not likely to augur well for either brand, as we know in today’s consumer on-demand world, consumers use different platforms for different purposes. If they sense that they are being cornered to adopt a platform over another, they can easily opt-out. FB would be better off to keep the brands separate, as it should be, and for the reasons why they are successful in their own right,” stated Yean Cheong, Head of Digital APAC, IPG Mediabrands.

However she was quick to add that if FB’s acquisition of WhatsApp is its way to tackle players such as LINE or China’s WeChat head-on, then it is on the right track.

Monetisation & M-Commerce…
Efforts for monetisation cannot be delayed for too long. But it may not necessarily just be advertising-focussed. “LINE for one, while more prominent in Asia, has lucrative commercial model via its stamps and partnerships. App Annie Index’ latest edition shows outside of games, Line was the top earning app and publisher in the world in 2013. Line ranked ninth in the list of most downloaded publishers and sixth most-downloaded app outside of games. According to the report, Japan surpassed the US as the top country in terms of app revenue, driven largely by games on Google Play. That means LINE’s home market likely helped push it to the top of the highest earners list,” added Ms Cheong.

“My take is that Facebook will make people pay the yearly USD 1 fee for WhatsApp and may also charge for Groups on WhatsApp or monetise that in some form,” noted Arnab Mitra, Co-Founder, Liqvd Asia.

In similar vein, WeChat started monetising from stickers, games and in-app payments last year. It is now not just a messaging app but a mobile wallet. Over Chinese New Year, WeChat started a ‘virtual angpow’ campaign, with a gaming option for people to send money to friends. The results were reportedly phenomenal, between the evening until 4PM on the first day of Chinese New Year, a total of 75 million virtual angpows were transacted across more than 5 million users, estimated about 9,412 virtual angpows transacted per minute during the entire holiday.

“What this means is that WeChat has linked more users’ bank accounts to its profile. No small feat to be ignored, and certainly caught the attention of the competition like Ali Baba. WhatsApp has sizeable enough an audience and reach, to play in this area. Mobile commerce has taken on a new form via these players,” said Ms Cheong.

Evolution of the messaging app
Mr Mitra draws attention also to the evolutions of the Facebook offer itself for its users. Video offering is one example. He said, “Facebook will integrate video chat to ensure bringing up the Facebook video chat feature back and compete FaceTime.”

Facebook can also allow people to take chats offline and connect on WhatsApp.

Asia has led the conversations in messaging apps and some of these developments are only indicators of the pace at which messaging business is evolving and attracting big monies. For Facebook, WhatsApp appears to be a value add buy for now. For the messaging world, the Viber and WhatsApp deal are both indicators of the dominance of the space in communication.

Noor Fathima Warsia

A veteran journalist in the Indian marketing, media and advertising fraternity, Noor Fathima Warsia took on the role of Group Editor -– APAC for Digital Market Asia in May 2013. Noor has focussed on tracking trends and developments in the Indian media industry.
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