- KPB & Co Research
When facebook gave the green light to begin developing software for an add supported version of WhatsApp, there were quite a few tremors across the company. Facebook acquired WhatsApp in 2014 for US$19Bn and both founders - Jan Koum and Brian Acton stayed on as part of the deal. In 2019 Facebook decided to bring ads to WhatApp, and both founders of WhatsApp resigned, then as details of the Cambridge Analytica scandal went into the public domain they proudly joined the #deletefacebook movement. In perhaps a twist of faith, today Facebook is shelving the idea of an ad supported model in favour of a model focused on businesses and their customers.
Both co-founders must be saying "I told you so" as they both were key proponents of the view that the app is better suited as a platform to assist business communications, as opposed to a platform to showcase ads. In fact in an interview conducted in 2018, Jan Koum said as much, he insinuated that after-sales services should be a key focus of the messenger platform. A word of caution though, Facebook was keen on pointing out that they may consider going the ad supported route at a later date, using the Status feature as the primary delivery mode. Many people in the tech and business space are gearing up for what this direction may mean for them, and this article seeks to shed light on what shape this new business focus may take going forward.
Reports are that the company will focus on features that allow businesses to communicate, and manage interactions with customers. In our view, such services will likely be targeted towards small businesses as larger businesses tend to outsource these business functions to call centers and other independent service providers. According to data provided by Facebook, over 90 million small business use facebook in one way are another through functions such as Facebook pages or Messenger, while only 24% of businesses that use Facebook pages also use paid media. There are also 10 million US small businesses who use Facebook's services. This of-course provides Facebook with a pool of potential clients for the development of services around the WhatsApp messenger, but how will businesses use this service ?
First Facebook already has a limited version of the App devoted for businesses on the Android and App store. The WhatsApp for businesses allows businesses to create a business profile containing business description, email, address and website. The initial services also allows businesses to respond customers to provide quick responses on frequently asked questions, set greeting messages and away messages. Nevertheless, there are avenues through which the service can be further improved, thereby generating more revenues.
WhatsApp messenger is an excellent tool for the pre and post-sales strategies of small businesses. In the pre-sales phase, the over billion users of WhatApp provide a channel through which potential customers can communicate with businesses to get information on product prices, product description, product use cases, and product fit. This kind of communication is also intimate enough to allow for the nurturing of the customer relationship as the customer moves through the sales cycle. In the post-sales phase, the small business is able to follow up with customers about service or product quality, and customer satisfaction. This is excellent for the small business as it provides a cost effective way to get the feedback needed to iteratively improve quality or enhance product features in the future. In addition, any product issues can be dealt with early in the after-sales process, which reduces the likelihood of the customer going on rant about a business' service quality on social media.
The messenger also provides an intimate setting for the distribution of important one-off notifications about events directed at a business' customer base. Such one-off events include product discounts, distribution of product coupons, promotional events, and personal holiday messages, among others.
Of-course with any new service there will be disadvantages. In most of the use cases outlined, the small business will likely have to take a lot business support services in-house. This could mean hiring of additional personnel or at least allocating meaningful resources towards customer communication. For small business owners the more services they take in-house, the more headaches they have to prepare to handle. This in-sourcing trend can have a negative impact on how well the business uses its limited resources to handle other important functions.
Facebook already has a leg up in the re-focusing of WhatApp as a business communications platform. The Facebook messenger platform already has a lot of the services that will be implemented in WhatsApp, and so all that needs to be done is to transfer the infrastructure and knowledge to the WhatsApp department. Perhaps, now that the company and the founders of WhatsApp see eye to eye, there could be a truce where the founders come back and help to push ahead with the changes. At this important juncture, Facebook, facing headwinds around data privacy in Europe and North America, and requirements to increase head count significantly is badly in need of additional revenues to justify a relatively high valuation.