Two weeks ago, Mark Zuckerberg announced that Facebook has recognized the imbalance of what’s in Facebook user’s News Feed and the company’s plan to shift it’s “focus areas”. Facebook Advertising has been a major profit driver for the social media giant but also a shift away from its original focus: Helping users connect with friends & family and enhance their well-being and happiness. Part of this new shift involves segmenting the businesses with the Facebook WhatsApp deal – How much did Facebook pay for WhatsApp? Almost $20 billion. In the past, we’ve investigated overall paid digital advertising trends, here we shift focus to why Facebook bought Whatsapp and what that means for your business.
The Facebook business model
Before Facebook and WhatsApp came together, the Facebook business model was fairly simple – just as two broad categories can be formed in its user base – regular users and business users. Facebook’s revenues can also be categorized as arising from two broad sources – advertising on Facebook Business and non-advertising revenue from sources such as Farmville and other apps. Apart from its shift in focus to cater to regular users, this business model has attracted plenty of scrutiny in recent months regarding issues like drying non-advertising revenue. Recent financial performance shows Facebook’s non-advertising revenue reduced, from an already negligible 2 percent last year (quarterly basis). This, in comparison with Google’s revenue, is astonishing as Google has managed to diversify its revenue channels more successfully.
While a regular Facebook user finds relief in the social networking giant’s shift in focus, a business owner who uses the website as an advertising channel would be tempted to read more. The social media site is shifting to content generated from users’ friends and family over that of the Facebook Business Manager. Although this move is primarily to enhance users’ well-being it is a threat to a lucrative marketing channel for businesses. As the platform beings to prioritize friends and family content, the availability for facebook advertising is decreasing and a good social media management strategy needs to be considered. Small businesses should gear up for higher advertising prices and limited visibility and need to consider alternate digital advertising strategies
WhatsApp Advertising on the rise
Over a billion people use WhatsApp globally – that’s one in every 7 people in the world. When Facebook bought Whatsapp for almost $20 billion, they acquired a new lucrative channel to reach digital consumers. In order to get return on the WhatsApp Facebook deal, they must create a sustainable business strategy for WhatsApp. Earlier this month, Whatsapp launched it’s new Whatsapp for Business channel specifically designed to cater to small and medium businesses with the goal to connect them with customers, and market new product and services.
On paper, WhatsApp for Business seems to have huge upside, with dedicated business profiles, new messaging tools and real-time data analytics.
The WhatsApp Facebook Deal: A Potential replacement or a business model threat?
The results of the Facebook Whatsapp Merger will need to be closely monitored by small and medium sized businesses moving forward. While it can be perceived that Facebook is realigning its services towards it’s core areas of focus, the new WhatsApp for Business platform could replace the advertising revenue lost from this realignment. Businesses in the U.S. and other developed markets will need to find alternate channels of advertising, and WhatsApp for Business might be the answer. Although Whatsapp for Business has the green light for advertising, it still has to be equipped with more features that support payment transactions, marketing analytics and safety concerns before supplanting Facebook Business.
Facebook’s shift in focus to prioritize content generated by friends and family is causing small businesses to reconsider their marketing strategy and reallocate their budgets to develop new ways to reach potential customers. It’s certain that Facebook’s decision will not directly mean business posts and content will be eliminated – it just means the content available on users’ News Feed will primarily focus on friends and family generated content. There is uncertainty around the advertising viability of Whatsapp Business as an alternate advertising channel or a potential replacement – but businesses must remain aware of new marketing channels. At Suncity, we are equipped to deliver a customized strategy which incorporates the changing needs of your customers within an evolving digital advertising ecosystem. We remain abreast of emerging digital trends to help our customers achieve their maximum ROI. . If you need insight about the advertising and expanding your marketing channels– please feel free to reach out. Our experts are available to bring your Advertising into the technology era!