Facebook made it easier for users to share their location. Source: Facebook
Letting your friends know you're on your way is great, but it would be better if you could easily tell them how close you were. Facebook (FB 1.09%) built that feature into its most recent update of Facebook Messenger. With two clicks, users can send their location, or they can agree on a meeting place with just an extra swipe. It's a nice feature, but nothing particularly groundbreaking for Facebook.
What's more important is that the new location feature lays a foundation upon which Facebook can build. Getting users to share locations as part of making plans opens the door for Facebook or third parties to build location-based services on top of Messenger. As Messenger product chief Stan Chudnovsky told TechCrunch, "What we're launching is the foundation of everything that's coming."
The Messenger Platform
At the F8 Developer Conference in March, Facebook introduced Messenger Platform and Businesses on Messenger. Since then, we've seen dozens of apps integrate with Messenger to send pictures and video, but nothing that Facebook can really monetize. Last month, Facebook was reportedly talking with developers to bring games to Messenger Platform, which could revive its payments business.
Location-based services such as Uber and restaurant reservations are another big opportunity for the messaging app, which has 600 million active users. Friends chatting about where they want to eat could easily make reservations and book transportation from within the app. It's a model directly ripped out of China's messaging app ecosystem. WeChat, for example, lets you book taxis from its app.
Making it easy for users to quickly find local businesses from within the Messenger app is just the start. With Businesses on Messenger, Facebook could make it easy for users to interact with those businesses. It could enable users to start a chat with restaurants, for example, to learn about the day's specials -- something that is easily automated. This could help Facebook attract more businesses to both Messenger Platform and its flagship platform, where it could sell them advertising.
Payments are coming
As I mentioned earlier, Facebook also introduced payments for Messenger, which it is slowly rolling out starting with select U.S. cities. Payments will also be a key piece of groundwork for monetizing Facebook Messenger.
But Facebook won't directly monetize payments at first. Transferring money between friends is free, and the money is transferred directly to a bank account instead of sitting in a Facebook account for days until withdrawn by a user.
Instead, payments might act as a carrot to get more businesses onto Messenger and to facilitate commerce. Facebook did the same thing with its flagship platform. Before going out to sell lots of advertisements, Facebook made products such as Pages and offered them to businesses for free. This led to a large number of businesses coming to Facebook, instead of vice versa. The ad sales process is much easier when businesses are already using your products.
Getting local businesses and location-based services on the platform is key to monetizing Messenger. Facebook isn't looking to charge its users to use any features it introduces on Messenger, so facilitating interactions between businesses and consumers on Messenger is its best way forward to monetizing the service's giant audience.
Long-term thinking
When Facebook brought on David Marcus from PayPal to head up messaging products, CEO Mark Zuckerberg noted that over time he saw payments becoming a part of Messenger and WhatsApp. He also noted that the company has a lot of groundwork to lay to attract the business community to those products. The new location-based features Facebook just introduced, along with its announcements in March, are just the foundation. Building on it will take time.
Investors should expect Facebook to take the long-term approach to monetizing Messenger, just as it has done with its flagship product and every other product it moved to monetize. Building out the business community on Messenger (and WhatsApp) will pay dividends in the long run, as very few platforms can match the reach and engagement of Facebook's messaging apps.
