Zuck’s Next Big Bet Is… More Ads. This Time, On WhatsApp.

Meta’s next substantial revenue stream might not come from Threads or the metaverse — but rather from WhatsApp, a platform it acquired for $19B in 2014.

While WhatsApp’s early ethos pushed the mantra “No ads! No games! No gimmicks!” with a focus on privacy, by 2019, the founders left, and Mark Zuckerberg began sharing and merging WhatsApp with Meta’s other apps.

Untapped potential: WhatsApp has become a popular tool in emerging countries — notably for businesses that use it for customer communication. WhatsApp hosts over 200M small enterprises and has been launching new features catered to them:

• Meta launched WhatsApp Channels in September — enabling users to follow updates from businesses and influencers.
• Last week, Zuckerberg announced that Channels surpassed 500M monthly active users in its first seven weeks.

Meta wants a return on its investment one day, and per the FT, WhatsApp is mulling over whether to introduce ads and in what form — leading to disagreements on if it’ll disrupt the user experience. The idea of subscription fees has also been floated.

Resistance to ads is futile

Meta makes ~98% of its revenue from ads, and many of its attempts to pivot have failed to produce results. But WhatsApp has been testing features that allow businesses to send DMs to users who opt in — and could potentially be sent to all users.

• Meta already shows ads on Messenger, and someone familiar with the matter told FT that ads in WhatsApp could be similar.
• WhatsApp’s head, Will Cathcart, denies the report, saying, “We aren’t doing this,” — but in a recent interview, Cathcart hinted at including ads inside Status or Channels.

Forward-looking: Meta now has the highest number of buy ratings since it went public in 2012 and a trading discount comparable to other major Nasdaq 100 and S&P 500 stocks, according to Bloomberg. Stifel analyst Mark Kelley suggests, “We don’t think you have to be a believer in the metaverse story to like the stock.”