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Facebook Inc (NASDAQ:FB) VS Chat Apps: If You Can’t Beat Them…

Facebook Inc (FB) Messenger

Facebook, Inc. (NASDAQ:FB) is the biggest social network on the planet.  Traditionally social media has been focused on allowing one person (or company) to reach out to many, it is now moving toward promoting more direct one-to-one communication.  Facebook is trying to master this with its Messenger app.

Facebook (FB) Messenger

Messaging apps gaining popularity

Users are now spending more time on messaging, which is evident from the fact that six of the top 10 most-used apps are messaging, notes data startup Quettra. In a day, messaging apps are used nine times compared to 1.9 for all other apps, notes Flurry mobile-analytics unit of Yahoo.

Even on Facebook, such apps more popular. Deutsche Bank notes that inside Facebook, WhatsApp and Messenger apps are clicked 25 to 30 times versus 15 for the main app. WhatSApp is expected to hit a billion user mark early next year, which is seven years after its debut, but two faster than Facebook, says a report from the WSJ.

Facebook, which is aware of the messaging trend, not only acquired WhatsApp for $22 billion in 2014, but is also making efforts to promote its Messenger app, which enjoys around 700m users. “We believe that messaging, it’s one of the few things that people actually do more than social networking,” Facebook CEO Mark Zuckerberg acknowledged last year.

A threat for Facebook?

Despite the efforts, the shift can be seen as a risk for Facebook, which earns by putting ads in the user’s “feeds.” Since many of the rival messaging apps don’t “show messages in a similar stream, making it more challenging to display ads,” says the WSJ.

Many of the successful messaging apps in Asia use a revenue model that does not depend on the ads. Popular app WeChat makes money when users buy real or virtual goods. Also, it inserts ads in its “Moments” feed, something similar to Facebook’s news feed, says the report. Similarly, Line, which is very popular Japan, Taiwan and Thailand, earns from in-app purchases. It also sells packs of online stickers for $1.99 each. Though with such initiatives, these apps are no way near to the revenue that Facebook generates from ads, but that does not mean they could not do so in the near future.

David Marcus, head of Messenger, acknowledging the threat from the Asian rivals, said “Right now, we make no money on Messenger,” adding “But we’re hopeful that over time we’ll find out a really good business model for Messenger and one that’s very sustainable.”

Another threat for Facebook is that users are now sharing less on the platform. In the Q1, around 42% of the users said they posted or commented on the platform, compared to 69% in the Q1 2013, claims market researcher GlobalWebIndex. Though users are not leaving Facebook, they are using it less frequently.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.