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WhatsApp Business India revenue set to cross $1 billion by next year, experts see WeChat moment

Enterprises including banks, insurance, retail businesses and new-age companies are driving the largest volume and revenue for the messaging app's business offerings. Other emerging areas include travel, hospitality and education.

November 01, 2022 / 12:32 PM IST
Representative Image: WhatsApp logo cutout placed on a keyboard

Representative Image: WhatsApp logo cutout placed on a keyboard

At a staggering $22 billion, WhatsApp has been Meta’s (then Facebook) most expensive acquisition to date. The deal had caused quite a stir in the tech industry since investors and analysts felt it was tough for the social networking giant to justify the astronomical price for an app that made little money.

Over the past few years, the app has seen explosive growth in terms of user base clocking 2 billion daily active users but is yet to become a big business for the parent firm.

That could, however, be changing soon.

As Meta aims to diversify its revenue sources beyond traditional digital advertising, it is looking to tap into WhatsApp’s ubiquitous presence in markets like India to drive the app’s monetisation.

This move also comes at a critical juncture for Meta, which is grappling with declining revenue for the first time in its history, due to a sharp slowdown in the online advertising market. The company is also attempting a risky and expensive transition to the so-called metaverse, which is still several years away.

India is the biggest market for the Meta-owned messaging app with over 400 million users in the country. The app, which makes money by enabling businesses and brands to engage with their customers, is set to hit revenue of $1 billion in India by next year, people familiar with the matter told Moneycontrol. WhatsApp declined to comment on these numbers.

That said, the rising user complaints of promotional messages from brands on WhatsApp without robust controls to tackle them, could also potentially dampen this growth.

The genesis

WhatsApp launched its first revenue-generating enterprise product called WhatsApp Business API in 2018. However, industry experts say business messaging has become strategically important for the company over the past 12-18 months due to which it has built several capabilities and features to the platform.

On October 26, during the company’s earnings conference call, Meta chief executive Mark Zuckerberg mentioned business messaging as a “major monetisation opportunity” and one of the three primary areas where they will focus their investment in 2023.

A major chunk of the revenues is currently coming from “click to message”/ “click to WhatsApp” ads wherein businesses can enable consumers to directly send a message from an ad they see on platforms like Facebook or Instagram or provide a call to action to send a WhatsApp message and interact with them.

During the call, Zuckerberg said that Click-to-WhatsApp ads have crossed a $1.5 billion run rate, growing more than 80 per cent year over year.

SaaS-like revenue stream

Facebook parent Meta also wants to double down on WhatsApp’s customer support software and its API (Application Programming Interface) platform, thereby creating a SaaS-like revenue stream that is more predictable than online advertising. It also helps reduce potential problems for the company like the one caused by Apple’s privacy changes.

The API platform is targeted at medium to large businesses and enterprises, helping them engage with their customers at scale while a free-to-use business app is aimed at small business owners who intend to have an official presence on the app and personally manage conversations with their customers. The company claims that the app has 15 million users at present.

ReadWhatsApp aims to attract more businesses with new cloud API and premium features

Aakrit Vaish, chief executive of Haptik, a conversational AI platform owned by Jio Platforms, said that WhatsApp’s business offering has completely changed, which has been a big reason for its increased adoption. This is besides the change in the way customers shop thanks to the Covid-19 pandemic.

“WhatsApp Business has built more product features in FY22 than the past five years combined. So it has transformed into a completely new offering,” he said “This is a WeChat movement happening (for WhatsApp), similar to what we saw in China.”

Among the big changes include the ability to send promotional messages, cloud-based API services and catalogue features that enable businesses to showcase and share their products and services with customers.

WhatsApp also signed a partnership with Salesforce in September 2022 that will enable the latter's customers to use WhatsApp as the primary messaging service to answer customer questions, send updates, and sell directly in chat while being able to manage them from the Salesforce platform.

Analysts say the next major addition could be the integration of WhatsApp’s payment service, which is yet to take off in a sizable manner in the country. This will also help Meta complete the entire customer journey - from discovery to customer support and transactions - within its family of apps.

A key step in this direction was Meta rolling out an end-to-end shopping experience on WhatsApp in August 2022, through a partnership with its investee company Jio Platforms, the digital unit of Reliance Industries Ltd (RIL).

Through this, RIL’s digital commerce platform JioMart allows users to browse the entire grocery catalogue, add items to cart and make the payment to complete the purchase without leaving the WhatsApp chat window. The shopping experience is powered by Haptik.

Neil Shah, vice president of research at Counterpoint, said locking customers to their own platforms will help Meta to monetise directly through commerce and indirectly by gaining insights about different customers and creating their social profile, which could feed into their ad engine while reducing the dependency on Apple and Google platforms.

This would mean marketers will be more inclined to spend marketing dollars for advertising and integrations on Meta-owned properties instead of their rivals, Shah said.

WhatsApp Business’s go-to-market is currently driven by partners, also known as business service providers (BSPs) such as Gupshup, Haptik and Kaleyra among others. The company currently offers various types of incentives, rebates and discounts for partners.

It currently charges Rs 0.29 for ‘user-initiated’ conversations and Rs 0.48 for ‘business-initiated’ ones. The first 1,000 conversations are free for businesses every month. A conversation is defined as unlimited interactions in 24 hours.

BSPs are free to add an additional cost on top of this for their customers. Some of the common business models they use include offering marked-up pricing or subscriptions to customers, bundling these services with other value-added services or charging a setup or development fee to set up the entire experience for businesses.

WhatsApp graphic

Who is using it?

Enterprises including banks, insurance, retail businesses and new-age companies, mainly startup unicorns (startups with a $1 billion valuation or more), are driving the largest volume and revenue for WhatsApp’s business offerings. Within enterprises, banks by far contribute the largest volume, two people familiar with the matter told Moneycontrol.

Other emerging areas include travel, hospitality and education, they said.

Deepak Sharma, President and Chief Digital Officer at Kotak Mahindra Bank, said they initially started with basic features on WhatsApp banking like checking account balance and viewing the last five transactions among others, for which a million early adopters signed up and started using the service.

Kotak Mahindra Bank was one of the first banks to use WhatsApp Business, starting with its digital banking offering Kotak 811.

“Now, we are seeing that the adoption curve of WhatsApp users is maturing for us to build beyond the initial set of use cases. Today, we have about 35-40 features that are already available on WhatsApp” he told Moneycontrol.

To be sure, WhatsApp has still not substituted a large part of customers' financial transactions but is solving the issue of access to information. It is also using the platform to provide targeted offers, based on customers’ requirements.

Customer response on WhatsApp to these financial products is 3-4x more than on any normal traditional channel, Sharma said.

Shift to messaging

This trend is part of a larger consumer shift towards messaging apps-driven experiences that was accelerated during the Covid-19 pandemic.

Gupshup chief executive Beerud Sheth said that businesses and brands are realising that (messaging apps) are where consumers are and where they need to build their digital presence.

“That digital presence is not going to be a website or even a mobile app. It's going to be a chatbot inside WhatsApp,” he said.

Sheth said chatbots and conversational experiences in emerging markets are the equivalents of websites in the Western markets.

“Think of WhatsApp as the new browser, the chatbots are the websites. Every brand, every business will have it,” he said. “The kirana store, local pharmacies, etc are not going to build websites and apps for their businesses. They are all going to build their store inside WhatsApp.”

Spam galore

For brands, promotional notifications on WhatsApp are significant improvements from text message campaigns since they get the ability to send more visual and interactive messages to consumers across multiple formats including images and videos.

“Unlike SMS, which is a one-way channel, we are able to engage customers via WhatsApp Banking if they need more information or a callback,” Sharma said.

This marked rise in brands adopting WhatsApp Business, however, has also resulted in a significant increase in users being bombarded with promotional messages, which was particularly evident during this year’s festive season sales, industry watchers say.

Several people have also complained on various social platforms about receiving spam messages from businesses on WhatsApp while lamenting about a lack of adequate controls to tackle the problem.

The key challenge for WhatsApp would be to ensure policing and monitoring to ensure it doesn't become like another channel for spam messages, industry experts say.

A Meta spokesperson told Moneycontrol they believe that the choice and control to message a business should always be with users.

“Our rule is that people always need to request to receive updates before a business can message them, and we empower people with easy ways to block a business or report a problem at any time,” the spokesperson said.

To this end, Meta is building tools and systems to tackle this problem, besides working with businesses to ensure users only get useful messages.

WhatsApp provides controls to users to block a business, which the company uses as a signal to limit a business's ability to message or take other action - including banning the account – if needed.

WhatsApp has also recently added the ability for businesses to create a simple way for customers to opt out of receiving certain types of messages from within the chat.

For instance, brands such as Swiggy and Tata Neu have built in options right within the chat – like a ‘START’ or ‘STOP’ button – to make it easy for people to control the communication they receive from the brand. Tapping this button will notify the business that the user would like to remove their WhatsApp number from receiving updates from them on a certain topic.

While onboarding, WhatsApp allows brands to only send messages to 250 customers in a day. They can also only use pre-approved templates to initiate messages, to ensure brands are sending messages that adhere to the company’s guidelines.

If a message template a business sends – like a holiday sale coupon – results in a high enough rate of people blocking or reporting the business, the company will stop them from sending the same message to more customers until it is updated.

Businesses that receive excessive negative feedback may no longer have access or face limited access to WhatsApp.

Going forward, WhatsApp also plans to give people the option to opt out of specific types of messages they receive from a business, such as coupons or promotions, thereby providing them greater control of the type of messages they receive from the business.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
Vikas SN
Priyanka Iyer