The Wall Street Journal is reporting that Facebook, Inc. (NASDAQ:FB) is looking into ways to monetize its Messenger app, including voice-to-text capabilities and facilitating communication between businesses and their customers.
Source: Facebook
Users are resistant to paying for messaging services — there are so many ways they can chat for free — so how would FB go about trying to generate revenue from Facebook Messenger?
And would any such strategy actually move the needle compared to the billions the company already collects every quarter for ad revenue?
Getting Users to Pay for Voice-to-Text
Smartphone users are pretty accustomed to the whole voice-to-text thing and they’re also accustomed to having the ability for free, whether that’s Apple Inc’s (NASDAQ:AAPL) Siri, Microsoft Corporation’s (NASDAQ:MSFT) Cortana or Google Inc’s (NADSAQ:GOOG, NASDAQ:GOOGL) Google Now.
Facebook purchased a speech recognition startup called Wit.ai several weeks ago and that acquisition would likely be part of any FB plan to add enhanced voice-to-text capabilities to Facebook Messenger.
Currently, users of the FB app can dictate a message to a friend and send it as a sound file that can be played back like a voicemail message. According to Forbes’ Amit Chowdhry, Facebook is testing a feature that would transcribe that voice message so the recipient could read it as text instead of having to play back an audio clip.
Interesting, but Google Voice already does that for free and it seems unlikely that FB members would shell out money for the feature.
What About Businesses?
This is where things could get interesting.
Just about any retail website you go to has a support chat option. Many companies are making it tough to actually call and talk to a representative, all but burying telephone information and pushing that chat option up front.
Many users seem to prefer chat, too. I know I would rather have a chat window open on my PC while I’m waiting than sit on the telephone listening to hold music.
However, the market for customer support chat clients is all over the map. A quick check shows several dozen players in the U.S. market, along with a slew of indie developers who offer chat plug-ins for websites. There’s no single dominant company and the capabilities of the chat systems they offer range from rudimentary to more sophisticated products that tie into customer management systems like SalesForce.com, inc (NYSE:CRM).
Rates charged by the companies that aren’t making their customer chat systems available for free can hit $20 per month per agent or more. Not a huge amount of money — although it’s tough to tell given that most of the chat providers aren’t publicly traded and don’t publish revenue.
This is a market that seems ripe for disruption and a real opportunity for FB to monetize that Facebook Messenger app.
Charge businesses to embed Facebook Messenger on their websites and suddenly you get an interface that many of their customers are familiar with and one that’s much more polished and capable than the freebies.
That alone should provide value for a business, but FB could also offer the option for those customers to log in using their Facebook Messenger account for more personalized service. And that would mean more data for the businesses using the system, compared to the typical anonymous chat session. We all know how valuable client data is to companies.
That text-to-speech thing could make more sense here, too. Companies could use it to take voice messages from clients (which would then show up as a message in a support rep’s queue) and respond in text using Facebook Messenger. That means customers don’t have to wait on hold for a response and don’t have to pick up the phone immediately — they can read the support response at their leisure and respond to it when they have the time. They also have a transcript of the interaction, so no furious jotting down of details.
Tying it all together is the ever-increasing social media interaction between companies and their customers. Using FB for chat would make it easier for customers to make the leap of interacting with a company on Facebook, and that helps to solidify that loyalty companies are hoping social media is a big part of.
Monetizing Facebook Messenger Is a Step Towards FB Revenue Diversification
In Q3, FB reported revenue of $3.2 billion, of which $2.96 billion was attributed to advertising. The company is killing it on ads (that number is up 64% from the previous year) and with two-thirds of that cash coming from the mobile side, it clearly has smartphones and tablets figured out too.
However, having all your eggs in one basket represents a risk. FB is collecting some fees from games and other services, but at the end of the day it’s currently relying on advertising for nearly 93% of its revenue stream.
Monetizing Facebook Messenger — especially a strategy of charging businesses to use the tool on their websites for customer interaction — offers a revenue stream that’s independent of advertising. It will never be enough to challenge ad revenue, but it would help to reduce that 93% number and get the FB logo in front of more eyeballs.
It might even attract the eyes of people who don’t already have accounts and may decide to join up if they regularly chat with online support.
More revenue is good, and having that revenue come from clients paying a monthly fee instead of relying on advertising is even better for Facebook stock.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
