WhatsApp cofounder Brian Acton recently revealed that the reason behind his surprise departure from the Silicon Valley giant in 2017 was its owner Mark Zuckerberg’s plans to monetize it through ads after Facebook Inc. paid a whopping $22 billion for the messenger app.
Acton told Forbes in his first interview since quitting that such a move made him “unhappy,” but his complaints to Zuckerberg fell on deaf ears, resulting in his exit and WhatsApp confirming it would launch targeted advertising next year.
“Facebook, as a public company, had to find a way to make money off WhatsApp (and justify the purchase). It now has well over a billion users, which investors will demand be monetized,” said Greg Sterling, a contributing editor at Search Engine Land.
But while Zuckerberg’s plans to make the ad-free WhatsApp a cash cow clearly displeased Acton and led to him walking away from $850 million in vesting stock (don’t worry, he’s still worth $3.8 billion), it has piqued interest in fashion and beauty brands and advertisers alike.
In fact, they’re already planning how to reach WhatsApp’s 1.5 billion users through targeting advertising on the status page, even though much of the details of how the feature will work are clouded in secrecy.
Mike Froggatt, director of research at global research firm Gartner, believes that advertiser interest is going to be “very high” as they’re constantly on the hunt for more personalized ways to get in front of users and modes that are novel and always going to be in high demand.
It also fits in with brands’ strategy of capitalizing on consumers’ increasing habit of shopping on their phones, having spent a record $2.1 billion on their smartphones on Black Friday and $2.2 billion on Cyber Monday.
“It’s where the consumers are,” Jocelyn Lee, head of media strategy at advertising firm Heat, said. “It’s where they’re buying or purchasing or checking out or researching.”
In addition to phones being permanently attached to their owners, another attraction to WhatsApp from a brand’s point of view is its international scope.
According to Statista, only 24.6 million of WhatsApp’s users are predicted to be in the U.S. by 2020, meaning that advertising through the app can reach a huge global audience. India is its biggest market, with Zuckerberg revealing earlier this year that it has 200 million monthly active users there.
Patrick Givens, vice president of VaynerSmart, the emerging tech division of digital ad agency VaynerMedia, said: “I think it’s an important channel in the mix as you look for global reach. Having WhatsApp opens up a tremendous population.”
Targeted ads will not be the first time that brands have used WhatsApp to connect with customers, however. They have been allowed to message users through the app for a while now, with Yoox Net-a-porter, Agent Provocateur, Carolina Herrera and Reliance Brands all early adopters.
Agent Provocateur, for example, launched its so-called Ménage à Trois campaign back in 2016, which allowed customers and their partners to have chats with a sales assistant to find out what was on their Christmas lists.
This service was taken to a new commercial level this year when it launched WhatsApp Business API and subsequently announced in September it would start charging companies for sending customer service messages such as appointment reminders and shipping details. Currently, these can only be responses to customer messages.
And interest around WhatsApp is just part of brands’ wider strategy of using messenger services to connect with customers. They’ve been using chatbots to answer questions on Facebook Messenger for some time, while in China, luxury brands have been allowed to advertise on WeChat for several years. Those that have taken advantage of the latter include Burberry, Michael Kors and Coach, among many others.
WeChat even has targeted advertising to entice the traveling Chinese consumer. This includes targeting them inside of China for preemptive travel before they leave, targeting them once they land in their destination, as well as targeting Chinese consumers who live in other countries.
Renee Hartmann, cofounder at consultancy China Luxury Advisors, said: “I would say honestly almost any luxury brand is active on WeChat and almost all of them are doing some sort of advertising.”
But only time will tell if retailers will favor WhatsApp over other methods, according to Rebecca Lieb, a media and advertising industry analyst and founding partner at Kaleido Insights.
“WhatsApp’s appeal as an advertising channel for retailers will come down to how appealing the ad offerings are on the platform. We don’t yet know a lot about that,” she told WWD, adding that it will also depend on how users react to ads being introduced on the app.
Search Engine Land’s Sterling believes Facebook will be cautious in the way it introduces ads so it doesn’t alienate users not accustomed to ads on the platform: “There’s substantial risk that if ads are introduced too quickly or intrusively that WhatsApp will lose a portion of its audience. By the same token, however, its installed base is pretty loyal.”
If it is a success, it raises the question of where companies will pull money from in their advertising budgets as messenger apps start to feature more heavily in fashion and beauty brands’ marketing strategies.
Heat’s Lee doesn’t think this would be social media, despite the bad year some platforms have had, as it “is where the eyeballs are” so adjustments to their advertising budgets will be made to outlets like print media instead (as Calvin Klein mentioned in its plans late last week).
“At the end of the day, brands, retailers and advertisers are going to be where consumers are and if consumers are on social platforms, they’re not going to cut from there,” she said.