Facebook’s (FB - Free Report) flagship mobile messaging service, WhatsApp, reportedly touched the 700 million monthly active user mark — a significant improvement from 600 million in August last year. Currently, WhatsApp is one of the premier mobile messaging services, reflecting a massive monetization opportunity for Facebook.
WhatsApp has more users than similar messaging apps, including Facebook Messenger. However, for Facebook, WhatsApp is still not a highly monetized business like its other businesses. The company expects WhatsApp to contribute to the company’s bottom line, once it touches the 1 billion-strong subscriber base.
WhatsApp added 300 million new users last year. However, the messaging service incurred a loss of $230 million in the first half of 2014. Currently, the only revenue source for WhatsApp is the 99-cent annual subscription fee after a free one-year service. So Facebook might have immense monetization opportunities from the WhatsApp business expansion.
However, with the growing trend of mobile messaging services, WhatsApp faces stiff competition from KakaoTalk, Snapchat, Viber, LINE and WeChat. As a result, we believe that heightened competition will make it difficult for WhatsApp to restructure its business model for profits and financial viability.
Facebook currently has a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in the technology sector include Geeknet, Inc. , Autobytel Inc. (ABTL - Free Report) and EVINE Live Inc. (EVLV - Free Report) . All carry a Zacks Rank #2 (Buy).