Facebook to Show Ads on Messenger to Bolster Revenue Growth
12 July 2017 - 3:08AM
Dow Jones News
By Deepa Seetharaman
Facebook Inc. has spent years developing two of the world's most
popular messaging apps. Now, with slowing revenue growth in its
core service, it wants to cash in.
Starting Tuesday, Facebook will show advertisements inside
Messenger, the chat app that Facebook says is now used by 1.2
billion people every month. The ads will be shown between users'
messages, similar to the way ads are sandwiched between posts in
Facebook's news feed, the main scroll of pictures, videos and posts
that greets everyone who uses the service.
Facebook plans to roll out the ads "slowly and carefully" to
Messenger's users, said Stan Chudnovsky, Messenger's head of
product, replicating the strategy followed by its photo-sharing
app, Instagram, which started showing ads to users in 2013 and took
a couple of years to implement more widely.
Facebook also has been studying ways to profit from WhatsApp,
the company's other messaging app.
Facebook is trying to make money from Messenger as it braces for
an expected slowdown in revenue growth from news feed, the primary
source of Facebook's revenue today, starting in mid-2017.
Executives have told investors that Facebook would no longer
increase the number of ads shown to users in the news feed. The
increases helped juice revenue in prior years, but risked turning
off users by jamming too many ads in their feeds.
Facebook has positioned itself to keep driving growth beyond
news feed, with its acquisition of Instagram in 2012 and with heavy
investments in messaging. It spun out Messenger as a stand-alone
app in 2011 and continued to develop it separately after buying
WhatsApp in 2014 for $22 billion.
"We believe that messaging, it's one of the few things that
people actually do more than social networking," Facebook Chief
Executive Mark Zuckerberg said that year.
Both Messenger and WhatsApp, which also claims 1.2 billion
users, have been studying moneymaking strategies centered on
connecting users to advertisers. Facebook has said two billion
messages are sent between people and businesses every day over
Messenger. Barclays Capital estimates that figure is about 2.5
billion for WhatsApp. But Messenger is more popular in affluent
markets like the U.S. and Europe, while WhatsApp is more popular in
developing countries that haven't yet been lucrative for
Facebook.
Facebook could net an extra $11 billion in revenue from the two
messaging apps by 2020, Barclays Capital estimates.
Facebook has been testing Messenger ads for six months in
Australia and Thailand, Mr. Chudnovsky said. He said users were
"very open" to ads that were useful and connected them to
companies.
Advertisers can use Messenger ads in two ways: to drive traffic
to their website or to open a messaging thread between the user and
company. Facebook is urging advertisers to use Messenger ads to
open a thread, where users can ask questions and seek advice about
a potential purchase.
"On Messenger, these ads open up a conversation and end up being
higher converting for the advertiser," Mr. Chudnovsky said.
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com
(END) Dow Jones Newswires
July 11, 2017 12:53 ET (16:53 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From Apr 2024 to May 2024
Meta Platforms (NASDAQ:META)
Historical Stock Chart
From May 2023 to May 2024