There's no refuting it: messaging apps are here to stay. Sure, it's still hard to justify the $22 billion price tag Facebook (NASDAQ: FB) paid for leading messaging app WhatsApp. But with SMS volume now well behind messaging app use, Mark Zuckerberg and his team of hackers aren't looking quite so crazy after all. And Twitter's (NYSE: TWTR) recent moves to make direct messaging easier are looking super smart.
As SMS texting fades into the past and users take to messaging apps for communication, Twitter wants in on the disruptive transition.
Twitter makes direct messaging easier
Twitter wants to make it easier for users to take public conversation private, CEO Dick Costolo has been telling shareholders. In 2015, Twitter is clearly set on following through with this agenda.
Earlier this year, Twitter introduced group messaging, enabling private conversations on Twitter with up to 20 people. Beyond messages, users could share tweets, photos, links, and emojis.
On Monday, Twitter made it possible for users to receive direct messages from anyone -- even if a user doesn't follow the person sending the message. Users can enable this messaging functionality in their security and privacy settings. This dramatically broadens the reach of Twitter's direct messaging.
Perhaps even more telling about Twitter's interest in direct messaging was the company's move on Monday to introduce a new direct message button next to the follow button on the profile pages of anyone a user can send a message to. Highlighting direct messaging so prominently on profile pages signals Twitter's seriousness about integrating messaging into Twitter.
Messaging is hot. But how will it be monetized?
It makes sense that Twitter is moving rapidly to make direct, private messaging on its platform easier. Message app users grew 115% in 2013 and 103% in 2014, according to data from marketing-research company Flurry. Facebook's WhatsApp alone hosted 7 trillion messages in 2014, or about 1,000 per person on the planet, according to The Economist. Meanwhile, SMS volume has peaked and is now on the decline.
But no matter how significant the transition to messaging apps is, the question remains: How will messaging be monetized? Facebook's WhatsApp charges $0.99 per year (after the first year, which is free) and has promised an ad-free experience. Will this be the model of choice for messaging? Or will the value of messaging apps come from intangible factors that complement complimentary businesses? Chances are, monetization models for messaging services will vary. The only thing that's certain about messaging monetization today is that there is no certainty.
Fortunately for Twitter, direct monetization for messaging may never be necessary. By making private conversations on the platform easier, the company is giving users more reasons to log in and to stay engaged. The company can indirectly profit from the increased engagement by compelling users to browse their public feed, where Twitter serves ads, more often.
Clearly good for business, Twitter's move to bolster its direct messaging abilities makes sense. Not only will Twitter likely be able to earn more advertising revenue from greater engagement, but the social company will also tap into a fast-growing market for Internet-based messaging and possibly even open doors to new opportunities.
Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook and Twitter. Try any of our Foolish newsletter services free for 30 days. 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.