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Facebook's WhatsApp Tests New Tools Through Business App

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Facebook’s (FB - Free Report) division, WhatsApp, is testing new tools and features which are aimed at improving communication between businesses and consumers. In a recent blog post, the messaging service announced that it plans to incorporate these features in soon-to-be-launched “free WhatsApp business app for small companies and an enterprise solution for bigger companies.”

Reportedly, Facebook is planning to monetise WhatsApp by charging business accounts. The ongoing verification of these accounts (through a closed pilot program) is the first step toward that goal. Per Venturebeat, the company is assigning a green badge next to a verified business account name and messages received from the account will be in yellow.

Facebook Reluctant to Monetize WhatsApp

WhatsApp monetization has been one of the most discussed topics among Facebook’s investors in recent times. The social media giant bought WhatsApp for a whopping $22 billion in 2014, when the chat service had approximately 450 million monthly active users (MAUs) with little revenues and huge losses.

At that time, Facebook hinted that it would think about monetization only when the service reaches more than 1 billion. WhatsApp surpassed the threshold in February 2016 and its user base has increased steadily to more than 1.3 billion MAUs, per Venturebeat
 

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Nevertheless, Facebook showed reluctance in charging the service apparently due to fears that it will lose users in emerging markets where the service is extremely popular. During last quarter’s earnings conference call, the company said that it is working on monetizing Messenger and WhatsApp. However, Mark Zuckerberg stated, “I want to see us move a little faster here, but I'm confident that we're going to get this right over the long term.”

Monetization to Diversify Revenue Source

According to CNBC, the new tools and features are being tested by companies based in Brazil, India, Indonesia and Europe where WhatsApp has a huge customer base. Per Reuters, the company had been testing a system (conducted by companies associated with Y Combinator startup incubator) that would let businesses communicate directly with users and was also gathering data related to the extent of usage and spams.

According to Recode, WhatsApp has been in the process of hiring product managers as well as product marketing managers that apparently hints at Facebook’s growing intent to monetize the service.

Notably, Facebook is significantly dependent on advertising, particularly on mobile advertising for top-line growth. However, the company’s decision to limit the number of advertisements in its users’ feeds is expected to hurt top-line growth, going forward.

In such a scenario, monetization of WhatsApp by charging business accounts will diversify Facebook’s revenue source. However, the company may face significant competition from notable business apps like Microsoft’s (MSFT - Free Report) Skype, Twitter (TWTR - Free Report) and Apple’s (AAPL - Free Report) iMessage.

Currently, Facebook has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) Stocks here.

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