As Asian multipurpose messaging apps take off, Facebook and Snapchat are looking east for inspiration.
As they surge in popularity, messaging apps like Snapchat, Whatsapp, and Facebook Messenger are looking for new ways to make money. With a primarily young and tech-savvy customer base, these apps are unable to rely on traditional ads or subscription fees. Instead, they are beginning to integrate third party business services into their platforms, a strategy dubbed “conversational commerce.” While this strategy is relatively new in the US, this is not the case overseas. In China, Tencent’s WeChat app keeps its users engaged with a bundle of in-app services, a strategy that US messengers are slowly gravitating towards.
WeChat: The Ultimate Bundle
Compared to a “Facebook-Whatsapp hybrid” or a “Twitter on Steroids,” China’s WeChat app has so many features that it could almost be considered its own operating system. Its premiere feature is messaging, but it also offers online shopping, on-demand services, news articles, restaurant reviews, mobile payments, games, stickers, and status updates, all from within the app. For its users, it serves as an iMessage, Newsstand, Yelp, PayPal, Amazon, Uber, CandyCrush, E*Trade and SnapChat all on its own. WeChat users can engage with the Chinese versions of any of these businesses without leaving the app.
Each time a user is prompted to use one of these paid services, WeChat makes money. As such, it measures success not on its number of users, but on the degree to which its app penetrates all aspects of their day-to-day lives. By integrating news articles, group chats, a payments platform, games, e-commerce, and car services into its app, WeChat keeps its users coming back to the app from the moment they wake up until they go to sleep. In the United States, where many apps pride themselves on doing only one thing, messaging apps are bucking the trend and starting to mimic WeChat’s strategy.
Snapchat Leading The Way
In the US, Snapchat pioneered conversational commerce through the “SnapCash” and “Discover” features. Snapcash allows users to send each other money through a partnership with Square, the payments startup. The Discover feature allows media publishers like MTV, Buzzfeed, and the Wall Street Journal to purchase a spot for their “story” on the discover page, allowing them to connect with Snapchat’s younger demographic and promote their content.
The Discover feature blends in with Snapchat’s existing UX, as users view a company’s “story” in the same way they would view their friends’ stories. With this design, Discover presents itself as an entertainment feature for users, while Snapchat makes money on the other side of the screen.
Snapchat’s popularity with millennials is one of its biggest value props: 60% of 13 to 34-year olds use Snapchat. It has already attracted attention as a potential investment platform, with 57% of investment advisors saying it could “absolutely” become a space where millennials learn invest in stocks.
Mark Zuckerberg has made it clear that he’s a believer in messaging: last year, he siphoned off Facebook Messenger as a separate product from the social network and dropped Whatsapp’s $.99 annual fee for its 900 million users. Starting with stickers and GIFs, Messenger has built up its feature base and is now testing payment and e-commerce capabilities for its users. The app’s strategy was well exemplified in 2015, when Messenger started allowing users to call an Uber directly from their chats.
David Marcus, the head of Messenger, sees an opportunity for businesses to use messenger to connect with customers in a more natural way. Down the road, e-commerce can be built into the messaging experience as smoothly as it has with WeChat. By making transactions easier, Marcus is betting on driving sales for businesses. For example, a customer can message a customer service rep: “Hey, I really like that T-shirt. Can I have three more?” and receive an order confirmation minutes later.
A Widening Service Network
As these apps expand their networks of services, we see an opportunity for investing within messengers. Younger generations grow up accustomed to messaging apps, so integrating brokerage services into these apps will be the best way to keep them engaged.
For apps, it’s difficult to monetize information, but easy to monetize actions. For this reason, messaging platforms are rapidly integrating actionable features to make money without showing ads to their users. By adding trading to their list of features, messaging apps can turn a trade idea into an actual trade, and engage a younger generation who is used to having everything at the push of a button.