Mark Zuckerberg is thinking a lot about messaging. If the $19 billion purchase of WhatsApp wasn't enough proof, the Facebook chief executive officer spent a hefty chunk of today's earnings call talking about the opportunity in mobile communication.
He boasted that 200 million people open the Facebook Messenger app at least once a month. He likened the service to Facebook itself circa 2006, before moneymaking features such as public pages were added. And he extolled the virtues of David Marcus, the former head of EBay's PayPal unit who Facebook hired away last month, as the person to lead the future of messaging.
"The amount of messaging and how we see that growing is crazy," Zuckerberg said. "There's so much groundwork that we need to do in order to make it so that people are communicating with businesses and public figures in these other apps that we're building."
Messaging is a natural area for Zuckerberg to place his attention, not just because of WhatsApp but also because competitors in Asia are proving there's a big market and a lot of money in it. One thing that he didn't want to discuss much on today's conference call was when exactly the messaging products would start generating revenue. That's OK. Facebook reported impressive quarterly earnings, with revenue surging 61 percent. The stock rose in extended trading past its all-time closing high.
So shareholders are inclined to believe whatever Zuckerberg has to say right now. With messaging, the CEO was adamant that Facebook would not "take the cheap and easy approach and just try to put ads in." Zuckerberg said: "We're going to take the time to do this in the way that we think that's going to be right over multiple years."
Zuckerberg did suggest that payments — an area Marcus is well-versed in — will probably be a part of the equation. This would be something of a new model for Facebook, which made 92 percent of its revenue last quarter, or $2.68 billion, from ads. But payments is the standard business model for messaging apps around the world, including the one Facebook just bought, and it's looking to be a mega business.
As Facebook figures out how it might monetize its millions of chatters, here are four numbers that should prod the social networking giant to move a bit faster:
$64 billion: According to one analyst, that's the eye-popping potential market value of Tencent's WeChat, which is the top messaging app in China. Tencent doesn't break out WeChat specifically in its financial reports, but it's a major driver for the company with 396 million monthly active users. The app, called Weixin in China, already monetizes in several ways including advertising, selling additional services, and acting as a sort of mobile wallet for booking a cab or ordering products. Elinor Leung, an analyst at CLSA who proposed the $64 billion valuation in a report in March, sees more ways for the company to make money from its growing fan base.
$9.8 billion: That's the estimated valuation of Line, which makes a messaging app dominant in Japan and other parts of Asia, if the company goes ahead with a planned initial public offering, Bloomberg News reported last week. Line, which is controlled by South Korea's Naver, has more than 480 million registered users and generates revenue by selling packs of digital stickers featuring cartoons characters and Hollywood icons. Here's another number to chew on: Line made 14.6 billion yen ($144 million) from its core business in the first three months of the year.
$200 million: That's how much revenue Kakao, creator of a messaging app mainly used in South Korea, reeled in last year. According to an estimate by research firm Nielsen, 93 percent of Korean smartphone owners use Kakao.
$495 million: WhatsApp had 500 million active users in April. Under the current business model, they should each pay the company 99 cents a year, totaling $495 million. However, it's not that simple. People who joined the service prior to July 2013 were guaranteed lifetime subscriptions at no cost, so the total amount is somewhat smaller. Even at a half-billion dollars annually, it doesn't justify the price Facebook paid to acquire the company. But the bet — echoing Zuckerberg's comments about Messenger today — is on more users joining over time and on finding other ways to get their money in the future.