Facebook's halt on WhatsApp ads: A step to build more trust?

In what seemed like a privacy move, Facebook reportedly backtracked on its plans to include ads in WhatsApp. In a statement to Marketing, a Facebook spokesperson said that the team is currently focused on building new features to help businesses achieve success as well as providing payments in a number of countries. Nonetheless, the spokesperson added that ads under the Status section of WhatsApp remains a long-term opportunity for the service although not subject to a specific timeline, and the team believes it is a great way for consumers to discover a business that is important to them.

Two years ago, Facebook said it would include ads in the Status section of WhatsApp beginning 2020 and the ads were intended to be a main mode of monetisation for WhatsApp. But long before Facebook's decision, WhatsApp co-founders Brian Acton and Jan Koum opposed such a move. In fact, prior to WhatsApp's acquisition in 2012, the service said on a blog post, "No one wakes up excited to see more advertising, no one goes to sleep thinking about the ads they'll see tomorrow," adding that nobody jumps up from a nap and runs to see an advertisement.

The blog post also said: "Advertising isn't just the disruption of aesthetics, the insults to your intelligence and the interruption of your train of thought," and that when advertising is involved the users are the product. WhatsApp also explained in the blog post that consumers' data is not involved when it comes to improving the app and "[it is] simply not interested in any of it". With all that has happened, it can be said that WhatsApp has come full circle.

What could have sparked the pull back?

Sam Browne, enterprise consultant, Asia Pacific for MightyHive told Marketing it is likely that Facebook does not want to deter users from the WhatsApp Status feature just yet. While the number of WhatsApp users is known, the interaction with the Status feature (similar to Instagram Stories) is not.

"Whilst the usage of Instagram stories has grown exponentially in the last one to two years in North American markets, the Status feature might be at a more nascent stage with users in other parts of the world where WhatsApp has a dominant share of users, such as Indonesia, India and Brazil," Browne explained. He added:

Facebook is known to be great market testers and it is likely this change has not come without rigorous testing and reason.

FALCON’s co-founder Max-F. Scheichenost told Marketing that this is a wise move, as one of the strategic pillars for Facebook is to build more trust around its brand given its latest public scandals. With advertisers and consumers paying close attention to whether Facebook will walk the talk, this move by Facebook might be a first step in following their strategic step of building trust with both groups.

Meanwhile, SearchGuru’s manager, performance marketing team, Justin Chen said this could be a result of the upcoming US elections. US presidential candidate Elizabeth Warren has taken a hard stance on Facebook due to ad fraud, anti-trust as well as data privacy issues. As such, Chen said any major changes to the platform will offer the candidates talking points during the debates, especially when WhatsApp began with a promise to users that they are not interested in selling ads or mining users' data.

Also, the company could also be protecting the interests of the other apps in its family - Instagram and Facebook - since WhatsApp shares plenty of data with them. "The data shared by WhatsApp can be used to create a unified ID for each user, which is indirectly used to serve more targeted ads to all the users on platforms such as Facebook and Instagram," he said. He added that if Facebook were to proceed with including ads on WhatsApp, this might trigger another PR crisis and jeopardise the capabilities of other platforms.

What's next for WhatsApp monetisation?

Nonetheless, it is still possible for Facebook to monetise WhatsApp through an app within an app model, similar to that of WeChat's. Scheichenost explained that it is possible for Facebook to first enable a payment function, which is the cornerstone of any super app ecosystem. "From there, it will likely integrate other apps within its platform and will transform WhatsApp from just a messaging app to a super app," he said.

With this, Facebook is then able to introduce a scalable and transaction-based monetisation model that is not solely based on advertising. "WeChat has perfectly shown how to monetise an ecosystem based on platforms, portals, social network and brands," Scheichenost said.

Meanwhile, MightyHive's digital analytics specialist, Southeast Asia, Vasily Popravko, said due to the coming sunset of third-party cookies, which was expected, as well as new digital privacy regulations, Facebook is strengthening its cross-platform targeting strategy.

"The company already benefits from rich user data coming from knowing your behaviour and preferences across your Facebook and Instagram accounts. Having WhatsApp in this ecosystem would improve targeting," Popravko said.

Also weighing in on the issue is Elena Mirandola, managing director, Southeast Asia at digital marketing agency Artefact who said Facebook's decision at first glance seems to follow the same path of Google's decision with third-party cookies, giving priority to the users as opposed to the advertisers. According to her, WhatsApp is becoming an increasingly multi-faceted tool where consumers use it to not only share their personal issues with family and friends, but also discuss business deals.

"For each user, WhatsApp is a protected space that contains sensitive information about each individual and his or her interaction with others. In a world where data protection and GDPR have become key topics, Facebook could not afford to intrude in such a private space without having a clear angle," she said. As such, Facebook would need to clearly define the various uses of WhatsApp, such as "Business" and "Personal".

One way to monetise WhatsApp, Mirandola said, is to roll out a Spotify-type model, where depending on the monthly package chosen - free or paid - a user would or would not be served ads. However, she said Facebook might not be ready for such a model due to WhatsApp consumers being diverse, and Facebook not having yet cracked its segmented products such as WhatsApp for Business.

Similar to Mirandola, SearchGuru's Chen, said Facebook could further monetise WhatsApp by charging a fixed rate for each user. "With 1.5 billion users, charging an annual fee of US$1 like what it did in 2012/2013 will get them a handsome US$1.5 billion revenue a year," he said. Chen added that WhatsApp could also offer a payment system similar to Facebook Pay or Libra, and charge merchants a small percentage of handling fee.