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Facebook lifts the veil on how it makes money with WhatsApp

The company finally provided details on how it uses WhatsApp to drive ad sales on its other platforms on Wednesday, Facebook (FB) and Instagram.

Companies that use WhatsApp to communicate with customers and complete transactions – a group considered essential for the future of the app – can since 2017 purchase ads on Facebook and Instagram that include a button that allows users to switch to WhatsApp. and strike up a conversation with that company. . CEO Mark Zuckerberg said on Wednesday that there are now 1 million businesses using these “click to WhatsApp” ads.

It also launches a new feature: Business users will now be able to start creating such ads directly from the WhatsApp Business app, which was not possible before, which will make the ad buying process more transparent. .

Zuckerberg made the announcement during Facebook’s earnings call for the first quarter of 2021. The company said total quarterly advertising sales of $ 25.4 billion, up 46% from the same period of the previous year. It posted earnings per share of $ 3.30, up 93% year-over-year, on revenue of nearly $ 26.2 billion. Wall Street analysts had forecast revenue of $ 23.7 billion.

The good results come despite a slew of issues Facebook faced in the quarter, including fallout from the January 6 riot on Capitol Hill and questions about disinformation, continued antitrust scrutiny and privacy concerns after. that millions of user information has been posted on a hacker site.

Facebook shares rose nearly 6% on Wednesday after-hours.

New WhatsApp feature

The new feature uses WhatsApp Business “catalogs” – essentially virtual storefronts or a menu on a business profile where customers can view their offers. Business users will now be able to select an item from their catalog and quickly turn it into a Facebook or Instagram ad with a button that redirects viewers to their WhatsApp profile.

Previously, business owners had to go to Facebook or Instagram to initiate the ad buying process.

“For a lot of people, online business is less about websites and stores than messaging,” Zuckerberg said. “The next step is to make it easier for businesses to adopt all of these services and give them the tools to manage messaging and customer relationships.”

The new feature is a sign that Facebook is doubling down on its plan to not allow ads directly on WhatsApp. Instead, the app’s future earning potential will likely come from offerings, such as payments and e-commerce.

“I want to be clear – we have a long way to go to create a full business platform across our services, and it’s a multi-year journey, but I’m very determined to make it happen,” Zuckerberg said.

By developing these new business models, the company uses WhatsApp to strengthen its core advertising business.

However, it is not known what impact this has. The company has not disclosed sales of click-to-WhatsApp ads, and the 1 million businesses that use them are just a fraction of WhatsApp’s 50 million business users. (Across all Facebook services, more than 200 million businesses use its business tools).

“Longer term, there is potential for them to monetize the WhatsApp platform, but it will take time until it becomes a bigger driver. [of revenue] but it remains an attractive platform, ”said Daniel Flax, senior research analyst at Neuberger Berman, ahead of the report and the announcement of the results.

Other income details

The first three months of 2021 have been good for Facebook’s advertising business – with many people still stranded at home, mobile advertising was a popular medium to reach consumers.

Facebook’s ad sales growth was driven by a 30% year-over-year increase in the average price per ad and a 12% increase in the number of ads served, CFO David Wehner said in the press release.

“We expect ad revenue growth to continue to be primarily price driven for the remainder of 2021,” Wehner said.

The company also reported an average of nearly 3.5 billion people using its family of apps, including Facebook, Instagram and WhatsApp, each month as of March 31, a 15% increase from the same period of the previous year.

In the current quarter, Facebook could start to face headwinds due to Apple’s new app privacy policy as part of its iOS 14.5 update.

“The impact on our own business will be manageable,” Wehner said of the update. “We continue to expect this to be a headwind for the rest of the year, but we are making good progress … on our own solutions to help advertisers navigate these changes, and that also includes helping advertisers to work with the Apple API as our own approach to using aggregate data for targeting and measurement. “


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