WhatsApp is in the process of killing off its various subscription fees to make its messenger service free, per its blog announcement earlier this week.
Even at $1 a year, that must add up to tidy sum. WhatsApp is second only to Facebook Messenger in global popularity, according to OnDevice Research., a London-based research firm.
It does have a plan for monetization though and — thankfully, as its users would probably say — this plan does not include ads.
Instead, WhatsApp has its eye on the enterprise market. As it said in its blog post, "Starting this year, we will test tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from."
Leveraging Its End-to-End Encryption
From the examples it provided — communicating with a bank about whether a recent transaction was fraudulent, or with an airline about a delayed flight — it seems as though WhatsApp plans to leverage its strong security bona fides.
One of WhatsApp’s selling points, after all, has been the end-to-end encryption for its messages. And security is important to users, as the OnDevice Research survey also noted.
"When we asked respondents what the most important feature was from a messaging app, on average we saw 79 percent say security. With 82 percent of Briton's agreeing that security is number one for them, it comes at a time when British Prime Minister, David Cameron wants to make it easier to access messages sent through apps."
And in theory the market is there.
According to Future Market Insights, another London-based company, the Enterprise A2P SMS market is expected to post a compound annual growth rate (CAGR) of 7.9 percent over the next five years.
In case you are wondering about the distinction of A2P (application to person) versus P2P, the former is an SMS message is sent from an application to a mobile subscriber or vice versa, in which case it becomes as P2A or person-to-application. Some of the key players in this space are Open Market, SAP Mobile Services, Syniverse Technologies, Twilio, Nexmo Co., CLX Networks, MBlox, and Symsoft.
Is Security Enough?
Richard Windsor, an analyst at London-based Edison Investment Research doesn't think the enterprise play will pan out for WhatsApp. Or to be more precise, he doesn't think WhatsApp will be able to make deep enough inroads into that market to justify its $22 billion whopper of an acquisition price.
And that is what this is really all about. To be sure, there are no overt signs that Facebook is pressuring the company to do so, but WhatsApp is nearing 1 billion in users, which in the past has been a signal of sorts for Facebook to move to monetization.
Unfortunately, WhatsApp is making its ROI road far steeper because it is adamant that it will continue to run as an independent company, according to Windsor.
Without some kind of integration with Facebook, especially Facebook Messenger, WhatsApp will never be able to create the kind of ecosystem necessary for the SMS service to pay for itself, he said.
An Ecosystem Would Work
But if these services were integrated, the resulting ecosystem could learn what its users do across a range of activities rather than just one. "If the services are not integrated then the ecosystem only learns about individual users within a single service and cannot connect the dots when a user spends time with multiple services from that ecosystem," according to Windsor.
"The value of understanding what the user does across services A, B and C is completely missed and it is here where the real upside is."