facebook messenger: the path to monetization

Facebook Messenger: the Path to Monetization

By

Alan Alden

Series-A Partners www.series-a.com

PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS

Messaging: The Fastest Growing Platform

1.4Billion

Current Users

2.5Billion

2018

PROJECTED ADDITIONAL USERSBY GEOGRPAHY

579

265

244

7345

Africa and Middle East

Asia -Pacific

North America

Europe

Latin America

Million Users

Million Users

Million Users

Million Users

Million Users

OPPORTUNITY

1.1 Billion Additional Users


The Two Horse Messaging Race

0

150

300

450

600

750

900

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

800+ million users

659 million users

212 million users

Messenger vs. WeChat*

Line (Japan)

WeChat / Weixin(China)

FB Messenger (US)

*WeChat, which is owned by Tencent, is called Weixin in Chinese


The Messaging Holy Grail

Increased Engagement

Balanced

EcosystemReduced Friction

The Move from Application to Platform


How to Reduce B2C Friction?

Provide a Deeply Integrated Payments Offering Capturing Credit Cards is Key

WeChat and QQ have more than 200 million credit cards on their platforms

Ability to capture loyalty and other cards enables companies to quickly delineate user and provides FB with better ad targeting

Integrate Commercial Customers into the Platform Facebook has more than 50 million active SMB Pages

WeChat has more than 10 million “Official Accounts” within the WeChat app

Creates own ecosystem and “browser” type effect, keeping users within the platform

Ease of Communication is Always Key Messenger’s Threads Concept is a great start

M and other forms of AI will increase the personalization throughout process


Monetization… FB’s Greenfield Opportunity

Facebook Global ARPU

Q4 2014 Q4 2015

$2.81

$3.73

Payments $0.19 Payments

$0.13

$3.60

Advertising

$2.62

Advertising

WeChat KaKao Talk Line

~$7.00

$4.24

$3.16

Asian Messaging Platforms Have

Proven the Potential of Monetization

Competitor’s ARPU


Monetization… WeChat’s Monetization

How Is WeChat (aka Weixin in China) Monetizing Users

Key Demographics

90% Users-18-36 Years Old

1.8:1 Male / Female Ratio

659M MAUs

1.1B+ Registered Users

100M Users Outside of China

Key Points Gaming is largest driver of revenue

54% of Tencent’s revenues

Parent co, Tencent, is now the biggest

gaming publisher in the world

$1.76B – Estimated influence on

lifestyle spending

50% of Users who use Taxi booking

feature spend an avg of $16/ month

20% of users spend $30 or more a

month on Official Account Services

200M Users are set up for payments

WeChat

~$7.00

E-Commerce Services~20%

Gaming

~55%+

Revs

Advertising~15%

Other~10%


The Model: WeChat Platform / Ecosystem

Gaming

Content

More than 10 million “official accounts” on the WeChat platform

Many businesses launch on WeChat before launching their own standalone apps

Has created an “app within an app” ecosystem

Businesses

Payments

More than 200 million cards linked to the WeChat and QQ platforms

Linked to many city services providers for bill payment

Users forced to provide payment details to interact with certain groups or businesses

More than 50% of WeChat’s current revenues

Largest portion of value-added services (VAS) revenue coming from gaming

Parent company, Tencent, is largest game publisher in the world, and owns stakes in Riot, Epic Games, Glu, as well as a 10% stake in Activision Blizzard

WeChat / Tencent have gained exclusive streaming rights to sports and entertainment content providers, including: the NBA, FOX Sports, 21st Century Fox, HBO, National Geographic, Warner Music Group, and more

Aggressively going into emerging markets outside of China and creating exclusive content deals with local entertainers

WeChat Emerging Markets Case Study:Content Acquisition in South Africa



Cliffcentral.comWeChat Gambles on Gareth Cliff, South Africa’s Howard Stern

On May 1, 2014, Gareth Cliff, the most popular media personality in South Africa

left terrestrial radio to launch his own online station, CliffCentral.com

with the help of WeChat and mobile provider MTN

Key Considerations To Success of Partnership:

Current media consumption habits

• Will customer acquisition be “evangelical sale” to gain new listeners to a new platform

Cost of streaming data for listeners/users outside of MTN

• Customers, especially younger ones in emerging markets, are very price sensitive

• Which carrier is the best partner: evaluation customer segmentation/ breakdown

Offline and online promotions and advertising

• What kind of resources will be required to market the new platform

• FB would have a distinct advantage here by leveraging previously “likes” and similar interests for targeting


Monetization… Messenger’s Opportunities

Payments

3rd Party Content

App Store

Advertising

Identity Management

Gaming

Travel B2B Services(Facebook for Business)


FB’s First Steps: Business On Messenger

Provides a platform for businesses and customers

to communicate directly with each other on mobile devices

Provides real-time multi-media updates and push notifications

Confirmations, customer service enquiries, etc

Enables businesses to provide highly personalized deals, offerings and services, creating increased affinity

Combined with new AI-based personal assistant,“M”, will lead to new levels of customer service offerings and efficiencies


Monetization / Partnership Considerations

Geography

Age Group

Frequency of Engagement / Usage / UX Impact

Size of Opportunity

Margins

Impact on Existing FB Clients

Vertical Analysis:Travel and Leisure



Messenger’s Opportunity to Unify Travel

Average user visits 38 unrelated websites during the 45 day period leading up to a trip searching for information and best prices*

Online Travel is a $500 Billion industry growing 10%+ a year

Mobile’s % of total bookings is expected to grow from 15% to 35% of all bookings in 2018

Global Travel-Related Spend is $3.6 Trillion!

* Source: Expedia Research


FB Travel & Leisure Partner Considerations

Popularity of activity within age group/ geography

Availability to work with distributors or incumbent providers

How often do users engage in activity

Current engagement on FB

In order to capture the margin, FB must be the Merchant of Record

1%

10%

12%

20%

20%

23%

25%

Flights

Cars

Sports

Concerts

Tours

Shows

Hotel

Margins By Category

There Is An Even

Bigger Opportunity…

and

Facebook Has All of the Pieces in Place…PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS


The In-Destination Opportunity

Flights$425B

Auto$350B

Lodging$580B

In-Destination Spend$2,200B

Food$800B

Local Activities$350B

Local Transit$600B

Travel Retail$350B

Local information is essential because nearly 80% of US travel is by car

< 1% of destination travel spending is booked by OTAs (because it is not “planned”)

Even when available online, less than 5% of local activity is booked online in advance

Local service providers are extremely fragmented, little publication of offers online, little

use of international standards for ease of distribution, and few global players

Source: USTravel.org, WTTC, IATA, Odigeo


FB “In Destination”: Pieces Are In Place

What Facebook Already Has

50 Million SMB Pages

123 Million events created in 2015

500 Million people use Events

Facebook Places API and Directory

Book Your Favorite Workout Class …and

Uber to it!

Powered with the MINDBODY API


Leverage FB Affinity to Target Prospects

Customer Engagement Already Established

Firms Typically More Digitally Savvy

Can Try More Innovative Offerings

Less Evangelical Sale = Shorter Cycle

Thank You

Contact Information:

Alan [email protected]
