Why Facebook's Next Five Years Of Growth Will Come From Messaging

May 04, 2018 1:30 PM ETMeta Platforms, Inc. (META)GOOG, MSFT, TWTR, TTWO62 Comments5 Likes
Bruce Krulwich profile picture
Bruce Krulwich


  • Facebook dominates the mobile messaging space through its ownership of both Whatsapp and Facebook Messenger.
  • Messaging platforms are becoming the channel of choice for purpose-driven content sharing as well as business-to-consumer communication.
  • Dominating messaging channels will give Facebook unprecedented insight into consumer plans and preferences as well as business focus areas.
  • Even more, a slow shift of serious social media from open platforms to messaging platforms will give Facebook continued domination in social.
  • New features detailed below may extend Facebook's dominance in the area, but there are also ways that other social platforms can grab specific messaging niches.

Analysis of Facebook (FB) has focused heavily on the company's ability to grow their social network user base and better monetize their users. Immediately after their IPO, there were concerns about their ability to monetize mobile users, which the company has since succeeded in doing. More recently, there have been concerns about whether they would lose users either because of privacy concerns or because of churn of younger users. Throughout, the Facebook story has always been the growth of their social media user base and their ability to monetize those users. But the Facebook story of the next five years will be about messaging.

Messaging was originally seen as somewhat tangential to social media, a kind of add-on that people would use but that wasn't central. But Facebook clearly valued messaging more, launching Facebook Messenger and acquiring WhatsApp. Messaging may itself be a small percentage of income to Facebook and other social platforms like Twitter (TWTR), but it will be the key to their growth. Here's why.

First, WhatsApp and other messaging platforms are increasingly being used for closed social networking. By sharing pictures and video clips on a WhatsApp group for their family, class, office, or social group, instead of to Facebook or Twitter, they know exactly who will see their material and they know that they will see everything that others share to the group. Moreover, the user experience of deciding to look at new social media from their family, by clicking on the family group, is more appealing to many people than deciding to look at a single feed that may or may not include things they want to see. Anecdotally, outside of the United States, WhatsApp is replacing Facebook and Twitter for a significant amount of media sharing, and this trend is coming to the States soon.

This is not only true for groups that know each other, it is increasingly true for professional groups as well. When this author arranged a channel to share pictures and comments relating to indoor location technologies at the yearly Mobile World Congress, WhatsApp was preferred over Twitter, LinkedIn, or e-mail. Popular WhatsApp groups range from sharing lecture recordings to sharing products that fit certain diets, from discussing technology to swapping stock tips. For all of these purposes, a distinct WhatsApp group was a more effective channel than a broader and more public social platform.

Second, WhatsApp and other messaging platforms are also being used heavily for closed-group discussions that used to take place by e-mail. Messaging platforms ensure that replies go to a group, keep the thread of comments in a single place rather than mixing them up in each person's inbox, and enable a person to decide when to look at all the messages in a single thread. Messaging also tends to be much easier and more usable than e-mail for short comments and discussions. E-mail then remains in use for longer and more formal messages.

Third, Facebook Messenger has very quietly become the communication channel of choice for communicating with stores and businesses. While business e-mails go into crowded inboxes, Messenger messages go to someone's phone. While most businesses have a single e-mail address or phone number for a chain or large business, many store branches or company groups have their own Facebook Messenger account. Facebook Messenger is very often the fastest way to get answers from a specific store branch or restaurant chain branch as well as from bigger businesses. Facebook has a Pages Manager app to support messaging and posting content on behalf of pages for businesses, organizations, etc.

Lastly, messaging platforms are expanding to include support for applications and games. As just one example, Zynga (ZNGA) used to focus strongly on Facebook-based games and is now moving into Messenger-based games. The same is true for many information services, which are launching Messenger based apps alongside their mobile apps and websites. These apps run on servers and answer messages with information, services, or games. While the artificial intelligence and natural language processing capabilities needed by these apps could use improvement, they are sufficient for the first generation of messaging-based services and games to be effective and fun.

How will Facebook and other social networking companies profit from messaging? There are several possibilities and presumably more will become clear over time. First and foremost, platforms can learn a considerable amount about people from their messages. Even without analyzing message content, people can likely be well understood by looking at the businesses to which they have sent messages and the subject matter of groups to which they belong. In this way, big data systems can analyze messaging use beneficially, with or without analyzing message content itself. For messaging to stay free, customers will need to be comfortable with such analysis to some extent.

But big data is not the only way to profit from messaging. Second, business can be charged for expanded or more sophisticated messaging services. Third, messaging-based apps can pay the platforms that they use. Fourth, businesses might pay a messaging platform for a degree of control over discussions between their employees, for example, additional encryption, the right to delete content from employee devices or connectivity to an employee directory.

What new developments can we expect to see in the messaging world?

First, I expect LinkedIn (owned by Microsoft (MSFT)) to offer serious support for business messaging. While LinkedIn does include user to user messaging, they do not enable businesses themselves to have a messaging account that can be answered in the name of the business. Given LinkedIn's position of leadership in social media for business purposes, and given that Microsoft also owns Skype, Skype for Business, and other messaging platforms, it seems like a strong move for LinkedIn to grab the messaging market in the non-retail non-consumer business segment.

Second, I expect WhatsApp to offer businesses the ability to have WhatsApp accounts directly for the business, less connected to an individual's cellphone number, to enable that platform as well to connect to businesses. Perhaps this will take the form of Facebook pages paying a small fee to have a virtual WhatsApp number. While this would break somewhat WhatsApp's strictly phone-based model, it would enable the popular platform to carry questions and answers between consumers and businesses.

Third, I expect messaging usability to get even better. For example, while WhatsApp currently enables groups to be "muted," meaning that unread messages will accumulate without bothering the recipient with notifications, there is no way to mute a group at night but leave it open during the day. There is also no way to write a message at night and delay its delivery until the morning. These are the kinds of small features that have potentially big impact on app usability.

Fourth, Google (GOOG). Google has Google Talk, Google Hangouts, and Google Duo and has had other ventures in the messaging space in the past. In 2009, Google Wave was in many ways ahead of its time but did not have the combination of usability and mobile orientation that WhatsApp has now. But none have had the success in either the consumer or the business space as WhatsApp or Facebook Messenger. Can Google leapfrog into the fray, by somehow leveraging their leadership position in mobile OS or e-mail? I suspect that we will see several such attempts. But I personally hope that they do not do so by changing GMail to be more like messaging. Messaging is messaging and e-mail is e-mail.

Fifth, there are new innovations that will come. One possibility is that that messaging platforms might finally be a successful channel for location-based friend finding. People that do not want to be found based on their locations by other people in general, might be comfortable with members of a specific group knowing when they are nearby. This is especially the case on WhatsApp, in which people's identities are validated by their cellphone numbers.

Sixth, stronger support for integrating voice and messaging. I generally do not like receiving voice notes on WhatsApp because I spend most of my time in places where I cannot comfortably listen to messages out loud. But if voice notes could be accurately transcribed, then the ease of sending messages by speaking can be combined with the ease of receiving messages by reading silently.

Whatever comes next, it is clear that messaging will be a huge growth area for Facebook and other social platforms in the coming years. Messaging platforms will also handle a huge and increasing percentage of mobile communication. If messaging is not part of your vision of the future, your vision needs to be amended. Facebook has clearly seen this first and the rest of the world needs to as well.

This article was written by

Bruce Krulwich profile picture
Founder of Grizzly Analytics. Now Director of Data Analysis at Seeking Alpha.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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