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1 Billion Users Strong, Messenger Reinforces Facebook's Competitive Advantage

By Daniel Sparks – Jul 20, 2016 at 9:51PM

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And it proves Facebook CEO Mark Zuckerberg was right about his bold bet on messaging.

Facebook Messenger hit 1 million monthly active users on Wednesday. Image source: Facebook.

In November 2014, Facebook's (META 3.10%) standalone messaging app hit the impressive milestone of 500 million active users. But this was apparently far from the service's peak. As of Wednesday, Messenger has already grown to 1 million monthly active users. The app's huge success reinforces Facebook's powerful competitive advantage in its network effect and gives credibility to Facebook CEO Mark Zuckerberg's bold move in 2014 to make Facebook messaging only available on mobile devices via its own standalone app.

Zuckerberg was right

While Facebook Messenger is its own app today, it wasn't always this way. Facebook messaging was initially integrated directly into the Facebook App -- similar to the way it is still integrated into the Facebook web experience. It wasn't until April 2014 that the company finally separated Messenger into its own app.

Facebook's decision to separate Messenger into its own app initially upset many users. But hindsight suggests it was the right decision. Not only has the app's user base soared, but the company has also already started the initial process of monetizing the service -- something that was difficult for investors to imagine when Facebook initially decoupled messaging from the native Facebook app.

As it turns out, Facebook's plans to turn Messenger into a business in its own right were actually quite aggressive. The social network first started implementing the beginnings of monetizing Messenger in the middle of 2015, when Facebook introduced tools for Facebook Page owners to encourage Facebook users to message the Pages. 

"There's a reason many people prefer to communicate with friends and family through private messaging: it's fast and convenient," Facebook said in a blog post last August. "And increasingly, people want to communicate with businesses in the same efficient way." The update included a "Send Message" button that could be featured in ad products and the ability for Page owners to reply to user comments on a Page post with Messenger. Since then, Facebook has continued to give businesses more messaging tools.

Getting businesses using messenger was a key first step toward monetization.

"[T]he long‐term bet is that by enabling people to have good organic interactions with businesses," Zuckerberg said during the company's second-quarter earnings call (via a Reuters transcript), "that will end up being a massive multiplier on the value of the monetization down the road when we work on that and really focus on that in a bigger way."

Since then, Facebook has introduced payment capabilities, third-party integrations, ways to chat with bots about products -- all setting the foundation for turning Messenger into its own business.

Facebook's competitive advantage

Facebook Messenger. Image source: Facebook.

But the benefit for Facebook of a rapidly growing message app isn't just the potential for a meaningful revenue stream in the future. It also represents a way for the company to improve overall engagement. Without separating Messenger into its own app, Facebook arguably wouldn't have been able to make Messenger as robust as it is today. But by separating Messenger into its own app, the company has been able to focus on bringing more user-friendly features, such as video calling and a robust lineup of emojis -- features that keep Facebook's user base engaged.

And higher engagement, of course, is critical to Facebook's sustainability as a business. The more active users the company has across its products, the stronger its network effect, or a competitive advantage that grows stronger with every additional user, is. At 1 billion users strong, Messenger is now a critical component of Facebook's business -- and a key competitive advantage helping keep users in the Facebook ecosystem.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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