When Facebook (NASDAQ:FB) acquired WhatsApp in 2014, investors wondered: With the messenger service seemingly committed to a subscription model for its primary source of revenue, could the social network be more open to this form of revenue than investors thought?
Apparently not. WhatsApp just dropped its subscription fees, admitting it's not working out.
WhatsApp's decision to remove subscription fees, along with new comments from the company about how it may monetize its service in the future, provide insight into Facebook's vision for monetizing messaging services.
Connecting businesses and consumers
Until now, subscription fees appeared to be one of the messenger service's primary plans for monetization. Before Facebook acquired WhatsApp, the 55-employee team had vowed to never have ads on the platform, opting to instead charge a subscription fee of $0.99 after the first year, which was free. This was particularly intriguing as Facebook's entire business depended on ads and none of its products featured a subscription model.
While we may never know if this was Facebook's original intention when it acquired WhatsApp, the messaging service appears to now have an entirely new plan for monetizing its platform. And it doesn't include a subscription model or traditional digital ads. The company simply wants to find a way to profit from helping connect consumers to business they want to connect with.
Here's an excerpt from WhatsApp's blog post announcing the decision to remove subscription fees, which provides some insight into the monetization plan:
Naturally, people might wonder how we plan to keep WhatsApp running without subscription fees and if today's announcement means we're introducing third-party ads. The answer is no. Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from. That could mean communicating with your bank about whether a recent transaction was fraudulent, or with an airline about a delayed flight. We all get these messages elsewhere today -- through text messages and phone calls -- so we want to test new tools to make this easier to do on WhatsApp, while still giving you an experience without third-party ads and spam.
Are WhatsApp and Messenger becoming one?
By rolling out features that make business and consumer interactions easier, WhatsApp's plan for monetization is beginning to mirror Facebook's vision for Messenger.
Facebook CEO Mark Zuckerberg explained this vision for monetizing messaging services during the company's second-quarter earnings call. "But the long‐term bet is that by enabling people to have good organic interactions with businesses," Zuckerberg said, "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."
What's the company's near-term plan for Messenger? To begin to facilitate business and consumer interactions organically, allowing these interactions to evolve more naturally rather than introducing a monetized means for interactions from day one. The company is already rolling out these organic interactions in Messenger.
And now, based on WhatsApp's plans to help users interact with businesses, it's looking like WhatsApp will take a similar route to monetization.
Of course, with both WhatsApp and Messenger owned by the same company, it was probably inevitable that Facebook's total vision for messaging for the two services would eventually align.
More closely aligned monetization strategies for the two platforms likely represents a win for investors, as it could enable better integration between the two messaging platforms. Furthermore, as the messaging services begin to mimic each other, Facebook could potentially roll out features across the two platforms simultaneously, benefiting from greater scale.
Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. 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.