How Facebook Messenger Will Drive FB Stock Higher

Facebook (FB) just announced that Facebook Messenger surpassed 800 million monthly active users. Just one messaging app touts more active users than that — WhatsApp — and FB owns that too. But when it comes to driving significant revenue for FB stock owners, Facebook Messenger is much closer than WhatsApp.

How Facebook Messenger Will Drive FB Stock HigherLast year, Facebook announced the Messenger Platform and Businesses on Messenger. While Messenger Platform has enabled apps that let users send interesting photos and videos to one another, it’s Businesses on Messenger that will drive revenue for the app.

That’s why FB is reportedly taking a different approach with Businesses, offering a software development kit called ChatSDK to help them build bots for Messenger.

Facebook Messenger to Become a Commerce Portal

In China, hundreds of millions of people use a chat app to conduct commerce. Hundreds of businesses have opened shop on WeChat, a messaging app owned by Tencent Holdings (TCEHY). Users can do anything from hail a taxi to book a doctor’s appointment just by using the app they already spend most of their time with anyway.

A couple months ago, Facebook Messenger introduced a very WeChat-esque feature, partnering with Uber to allow users to request a ride from within the messaging app. This was largely overlooked by FB stock investors, but it’s actually a very important step for monetizing Messenger.

With the Uber integration, there was no need for users to download a separate app, and they can create an account instantly with their Facebook credentials. ChatSDK supposedly makes it easy for business to create similar “apps” for Messenger.

The reason WeChat has become so successful with businesses is because it solves a fundamental problem. Businesses want a presence on people’s smartphones, but nobody wants to take the time to download or use their apps when they’re only going to need them once in a blue moon. Chat-based apps don’t need to be downloaded, and getting a user to engage with them is as easy as asking them to send a text.

A restaurant could use ChatSDK to let customers know when their table is ready. The next time that customer wants to go to the restaurant, he might make his reservation through the Messenger app. The restaurant could send back a list of specials or promotions.

Turning Facebook Messenger Into a Revenue Machine for FB Stock

When FB announced M, an AI-powered virtual assistant for Facebook Messenger, the potential for revenue was quickly realized by analysts. However, M is limited to about 10,000 users in the San Francisco area due to the constraints of its AI. While FB plans to expand M, it will do so slowly.

ChatSDK enables Messenger to get lots of features promised by M right now. Users might have to do a little more work, but anything from catching a ride to ordering takeout to sending someone flowers or booking a hotel is possible with ChatSDK.

Importantly for FB stock investors, wherever there’s money changing hands, there’s an opportunity for the platform to make money. WeChat generates an average of $7 per user, according to Nomura, while WhatsApp makes less than $1 and Messenger makes nothing.

And with WeChat’s user base concentrated in China, where the cost of living is significantly lower compared to other markets, the potential is much higher for Messenger. During the third quarter, FB stock investors saw 7.5 times more revenue per user in the U.S. and Canada compared to users in the Asia-Pacific region.

Note, Facebook doesn’t operate in China.

Even the global averages were twice as high as Asia-Pacific.

With 800 million users around the world, Facebook Messenger could drive an annual revenue of between $10 billion and $15 billion for FB stock investors once it develops a community of businesses with chat-based apps on its platform just by using the same monetization methods as WeChat.

Adam Levy holds no positions in any of the companies mentioned in this article at the time of writing.

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