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New Business API, old business model
August 10, 2018
A conversational newsletter by
When WhatsApp unveiled its new enterprise API last week, most tech reporters determined Facebook was getting serious about monetizing the chat app it purchased for $19 billion in 2014.
 
They’re probably right about the money, but wrong about where it’s most likely to come from.
 

No reply for you! 🥣

TechCrunch’s Josh Constine was first out of the gate with a hot take under the headline, “WhatsApp Finally Earns Money by Charging Businesses for Slow Replies.”
 
Constine explains that WhatsApp will let businesses respond to messages from customers for free for up to 24 hours, but charge them to continue the conversation once that window closes.
 
From there, he jumps to an interesting conclusion:
« If users get quick answers via WhatsApp, they’ll prefer it to other channels. Once businesses and their customers get addicted to it, WhatsApp could eventually charge for all replies or any that exceed a volume threshold, or cut down the free window.
»

You down with A2P? 🎤

As Constine notes, the API will also allow businesses to “programatically” send notifications like receipts, tickets and shipping confirmations to customers who have opted in.

While charging businesses to reactive conversations may prove to be a significant revenue stream, these automated notifications — known as application-to-person or A2P messages — are the real backbone of WhatsApp’s monetization strategy.
 
The A2P SMS market is expected to reach $70 billion by 2020 and it’s precisely this pie that Facebook wants a piece of.
 
As I’ve reported, WhatsApp’s interest in A2P messaging is a major reason telcos like T-Mobile and Sprint have allied with Google in its campaign for global adoption of RCS, the next generation text messaging standard.
 
RCS is supposed to bring texting into the 21st century and boasts many of the same features (rich message types, branded business profiles) as WhatsApp Business and Apple Business Chat, Google’s other mobile messaging rival.
 
Global telcos have already lost the lion’s share of consumer messaging traffic to chat apps; they’re not going to relinquish the business messaging space without a fight.
 

Advertising an ad-free zone 🥧

WhatsApp is different from other major chat apps for two key reasons. First, it’s encrypted end-to-end. Just this week, Facebook raised alarm bells when the Wall Street Journal (paywall) reported it was asking banks to share customers’ financial information.
 
While the report was likely blown out of proportion, it’s clear that in a post-Cambridge Analytica world, people remain wary of Facebook’s commitment to privacy.
 
Because WhatsApp is encrypted end-to-end, messages can't be intercepted and read by any third parties, including Facebook. That means businesses can trust it to keep their conversations safe and secure.
 
Second, WhatsApp is continuing to shield its 1.5 billion global users from ads and promotional messages. Unlike Facebook or email, the WhatsApp inbox is a pristine space, currently reserved for friends and family.
 
That’s why the prospect of messaging customers on WhatsApp is so appealing to businesses. It’s also why WhatsApp is keeping a tight grip on what types of messages brands can send, and to whom.
 
But here’s the thing. When it announced the Business API on its blog, WhatsApp also revealed that businesses will be able to add click-to-message buttons to Facebook ads that prompt users to initiate conversations on WhatsApp.
 
By owning both a major channel of discovery and the leading channel of engagement, Facebook can have its pie and eat it too.
 

Early access, early days 🌅

WhatsApp’s Business API is still in early access, but we’re starting to see some interesting use cases around the world. In Brazil, for instance, journalists are using the API to combat the viral — and sometimes deadly — spread of misinformation on the chat app.

Writing for No Jitter, Smooch CEO Warren Levitan explains what large businesses need to figure out before WhatsApp opens the floodgates:
« As it turns out, the very same attributes that make the channel so valuable for users make it far more complex for businesses to adopt and maintain than any other messaging channel.
»
Read the full article here
🎉 Best wishes for a relaxing weekend! Please send in your feedback, story tips and WhatsApp monetization theories by responding to this email.

Dan Levy
Editorial Director
@danjl
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