WhatsApp's India dilemma: Massive userbase but struggling revenue; what can Meta do?

Nikila Srinivasan’s elderly mother in Chennai uses WhatsApp to talk to her milkman. Like millions of other Indians, the messaging service is not only her link to other users and services, but also her US-based daughter. “WhatsApp is a place where people are having their everyday conversations,” says Srinivasan, Global VP of Business Messaging at Meta. One of her responsibilities is to look for ways to monetise WhatsApp.

And that is a question that has bugged the messaging service for long. In 2014, when Facebook (now Meta) Founder and CEO Mark Zuckerberg unveiled his plans to acquire WhatsApp for $19.6 billion, many called the deal overvalued. But ace investor Warren Buffett spoke favourably. “I don’t understand technology, but I understand people. If Mark Zuckerberg believes in WhatsApp, that’s good enough for me,” the Oracle of Omaha had said.

But while Instagram—bought in 2012 for $1 billion—posted an estimated $51.4 billion in revenues in 2022 (per a Social App Report), WhatsApp brought in nearly $13 billion in 2022 (per AppMagic). The big difference between them lies in their monetisation models—which for Instagram, is mostly ad-based. Experts say that an encrypted messaging platform like WhatsApp isn’t favourable to ads.

It’s not as if WhatsApp has not tried; from charging users $1 per year, to launching WhatsApp Pay for which businesses would have to pay a flat fee of 3.99 per cent on every transaction, it has done it all, but to no avail. India, Meta’s happy hunting ground for pilot projects, too has disappointed WhatsApp in terms of monetisation, so far.

According to Barnik Chitran Maitra, Managing Partner at consultancy Arthur D. Little, India and South Asia, India is a cluttered market and it will be an uphill task for Meta from a monetisation standpoint. “They have customers in India because it’s free,” he says, adding, “WhatsApp can’t give businesses data that they can use for targeted ads because that’ll be a clear invasion of privacy… If you can’t personalise data, it’ll seem like spam”.

It is difficult to convince tight-fisted Indian users to part with their cash. Maitra explains that people have overestimated the market size or willingness to pay in India. “Only 30-40 million households have a willingness to pay. This is a business model no one has been able to crack, which is why no one is profitable at scale,” he says.

Yet, WhatsApp, and Meta, have big plans for India.

The Business Plan

Today, WhatsApp has more than 2 billion monthly active users (MAU), and in India, its largest market with over 400 million users, its revenues are inching towards $1 billion, per estimates. “India [is] a country that’s at the forefront... You’re leading the world in terms of how people and businesses have embraced messaging,” Zuckerberg said in a virtual address at Meta’s annual event in Mumbai recently. “We’ve continued to innovate with our messaging formats, our group chats and broadcast channels... [And we’re] creating simple to use and easy to scale tools so they (businesses) can connect with their customers in meaningful ways,” he had said, adding that he sees business messaging as a “major monetisation opportunity”.

Sandhya Devanathan, VP & Head of Meta India, tells BT that India is a priority market. “It’s a great opportunity not just to monetise [WhatsApp] but also do game-changing innovation... Just last year, we saw conversations with businesses double in India,” she says.

But she admits that there are challenges. “If we don’t build good experiences, users will be put off. The focus is on... giving the power back to users,” she says, adding that users can block businesses if they send too much spam. “And businesses can only reach out to users if they have consent.”

Meta had recognised the kind of monetisation opportunities a large user base could provide early. In 2018, it launched the free-to-use WhatsApp Business App, which today has an estimated 1 million-plus businesses in India. On this app, businesses can create their profiles and link their websites, Facebook pages, etc. to communicate with users. Now, Meta also has a subscription via which businesses get access to WhatsApp Business Premium, with advanced features. In June, Meta said the WhatsApp Business App had seen MAU quadruple in the past three years to 200 million.

WhatsApp’s major revenue source is the WhatsApp Business API (application programming interface) that Meta sells to businesses. This allows firms to automatically respond to customer queries, send shipping confirmation, and make payments. Firms that use the API are charged per conversation, which includes all messages sent in a 24-hour session. WhatsApp has also launched Flows, an in-app shopping experience.

Per Srinivasan, there are two real business lines for Meta. “There’s click-to-message ads, built with a goal of helping businesses reach more people with Facebook and Instagram ads—that take users into one of our messaging apps. And paid messaging that enables them to have in-thread conversations with people,” she says, adding that click to message is “a $10-billion run-rate business today”.

The India Strategy

WhatsApp’s monetisation strategy in India is multi-pronged. While WhatsApp for Business is free for small businesses, larger ones with high communication volumes pay to use certain services, and the API allows integration with customer relationship management (CRM) systems for a fee.

According to market research firm Chrome Data Analytics and Media, WhatsApp for Business is paving the way for the monetisation of messaging services in India. “Its simplicity makes WhatsApp a preferred choice for millions to graduate to WhatsApp Flows and WhatsApp Payments,” says its Founder and CEO Pankaj Krishna.

Per a Business Messaging Usage Research by Kantar, daily conversations between people and businesses have more than doubled in India since last year, while 80 per cent of consumers picked messaging as the preferred way to communicate with a business. Devanathan is betting on the metric that India is projected to have 400-450 million online shoppers by 2025, which will also enable Meta to go deeper into its towns and cities.

Experts believe that rolling out an end-to-end shopping experience on WhatsApp in August 2022 through a partnership with investee company Jio Platforms, the digital unit of Reliance Industries, was a game-changer that allowed JioMart users to complete purchases without leaving the chat window. Today, WhatsApp Business’s go-to-market is driven by business service providers (BSPs) like Gupshup, Haptik and Kaleyra. It charges Rs 0.29 for ‘user-initiated’ conversations, and Rs 0.48 for ‘business-initiated’ ones. BSPs are third-party solution providers with expertise on the WhatsApp Business platform in managing communications for the approved use cases of customer support and time-sensitive, personalised notifications, etc.

One of the first online marketplaces to come on board around two years ago—using Gupshup as a partner—was MakeMyTrip’s redBus, which has around 50,000 buses on its platform. “The kind of reach WhatsApp brings is mindboggling. If there’s commerce flow on WhatsApp, it can give those users who prefer to book offline a medium to book tickets online,” says its Chief Business Officer Manoj Agarwala. He adds that 40 per cent of its conversations on WhatsApp is in vernacular languages. “If WhatsApp doesn’t give us overall volumes it should definitely give us new users,” he says, adding that redBus expects 30-35 per cent of its new users to come from the platform.

The Way Ahead

Despite the challenges, the Meta team is looking forward to a bright future. It is focussed on building India as a big growth driver. Devanathan says banking, financial services, insurance companies, e-commerce firms, etc. have some obvious use cases, while Srinivasan says speech-to-text is going to be a powerful tool. “There’s a lot more mediums we can explore in India. What generative AI can do for business messaging is transform a set of use cases that were not as valuable for businesses, like customer support,” she says. Agrees Prashant Garg, Partner at consultancy EY. “Mobile communication apps enabled with generative AI can be pivotal in providing enterprise solutions and enhanced customer experiences. It will help mobile communication apps monetise their platforms,” he says.

Channels—the recently-launched one-way broadcast tool for admins to send text, photos, videos and polls to their followers—is being looked at as the company’s next pillar of growth in markets like India, Brazil and Indonesia. “Channels is a potential source of revenue for us and we’ll look to support these admins to monetise their Channels,” says Srinivasan. According to her, the best way to build products is to watch and learn how people are organically using the product. “With innovative features like voice messaging turning big, we just need to keep listening to our customers (pun intended),” Srinivasan says.

But while WhatsApp will keep listening to customers, the big question is: will its customers loosen their purse strings for the company? Meta will certainly hope so.

@PLidhoo