Tech Drivers
Tech Drivers

Here's Facebook's plan to make money from Messenger

Key Points
  • Facebook has warned that the traditional News Feed cannot handle many more ads, so it's looking for new revenue sources.
  • To this end, Facebook wants businesses to use Messenger for customer service, social integrations and traditional ads.
Options traders are betting that Facebook will fall on earnings
Options traders are betting that Facebook will fall on earnings

Facebook sees an opportunity to connect businesses with its 1.2 billion Messenger monthly users — and create new revenue sources for the company along the way.

"There's an app consolidating phenomenon where people spend time on fewer and fewer apps," Kemal El Moujahid, Facebook's product manager for Messenger and virtual assistant M, told CNBC. "So, if you want to reach out to your consumers on mobile, you have to be considering Messenger."

There's a growing concern that digital media users are getting sick of seeing too many ads in their social media feeds. Facebook Chief Financial Officer Dave Wehner addressed the issue in July 2016, saying ad load (or the number of ads on a website or platform) would be a "less significant factor in driving overall growth, especially after mid-2017."

So as the main Facebook feed is almost full, the company is starting to monetize its other products. And there's plenty of room for growth on Messenger as more people include messaging apps as part of their daily lives. More than 2 billion people —about 80 percent of smartphone users — are expected to be on messaging apps by 2018, according to eMarketer.

"Our people are spending the whole day on Messenger, and they want to be able to run their life from Messenger," El Moujahid said. "Being able to consume these services without having to download an extra app is a huge added value for them."

Here's three main areas Facebook sees opportunities for businesses to use Messenger:

Customer care

The phone is out of date for customer service because people can't multitask while talking, El Moujahid said. Email can be slow. Developing your own live chat experience can be costly. Many companies use online forms, but people don't often finish filling them out.

"It's not very delightful as a user, and you have a high dropout rate," El Maujahid said. "Messenger is more conversational."

Facebook is trying to convince companies to move those experiences to the Messenger platform, since 70 million businesses have a presence on Facebook already.

It's fairly easy to create AI bots for messenger, and most of the questions people have are simple enough for bots to understand, El Moujahid explained. For complicated requests bots can't handle, humans can always step in.

Telecommunications companies like Globe and Rogers have migrated customer support services over to Messenger. Sephora now allows customers to book makeovers through Facebook Messenger.

Social experiences

Facebook is working on ways to integrate other company's bots so users won't have to leave its app to use the other features.

For example, Messenger users can add Spotify songs. A clip of the song plays directly in Messenger, although users will have to leave the app and go to Spotify to hear the full track.

Although Facebook features certain bots today based on popularity and other factors, it's easy to see how this feature could be sponsored in the future.

Facebook is also investing in its AI assistant, M.

M Suggestions, which launched in April, scans through conversations for keywords and then suggests actions. The feature is available in the U.S., and parts of it have rolled out in Mexico and Spain. It also became bilingual last month. Suggestions could be as simple as M reminding you to wish someone happy birthday if it is their birthday.

Some businesses already integrated with M. For instance, if you include the world "delivery" in your message, M will post a button to let you and everyone in the conversation order from Type "recipe" and M will let you browse through recipes courtesy of Food Network. More partnerships are expected to roll out in the next couple of months.

"It's a very delightful way for users to discover features and ways they can improve their conversations," El Moujahid said.


Messenger is also finding places for traditional marketing. It began rolling out image-based ads on its home tab globally in mid-July. It allows companies to link a Facebook ad to a messaging experience on Messenger, including sending coupons, or a URL.

Companies can also send messages to customers who had previously messaged the company. If the customer initiated the messaging, its free for the business to send them messages for up to 24 hours. Afterward, companies get one free message. They then have to pay to send any more. This can be useful for re-targeting customers and getting them to make that purchases, El Moujahid said.

Facebook reports earnings after the bell on Wednesday. Expect to hear the company talk up the business opportunities for Messenger and its other messaging products on the call.

See also: A figure in Alphabet's earnings report may signal Facebook will beat the Street

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