Marketing

Meta sees 'major' opportunity in conversational commerce

Messaging is already the foundation of a $9 billion ads business at the Facebook and Instagram parent.

Meta sees 'major' opportunity in conversational commerce
Meta is eying business growth in messaging. (Photo by Dima Solomin on Unsplash)

As the seek to reach consumers where they are, marketers often look to the digital surfaces where people spend the most time.

This has prompted brands and retailers to turn to social media, email and SMS as they seek to engage with shoppers. In these areas, they can reach consumers while they are socializing or checking on work matters, in a space where they check back often.

One of the latest evolutions to take place is the exploration of conversational commerce, which broadly defines shopping that takes place via messaging. Thanks to a few lines in a recent earnings call, there are signs that this nascent form of commerce is getting a boost from a platform that became one of the biggest enablers of ecommerce over the last decade.

Meta Platforms sees direct messaging as an area with untapped potential for advertising and business communications across its apps, which include Facebook, Instagram and WhatsApp. On the company’s third quarter earnings call, CEO Mark Zuckerberg called messaging “a major monetization opportunity.”

“Billions of people and millions of businesses use WhatsApp and Messenger everyday, and we are confident that we can connect them in ways that create valuable experiences,” Zuckerberg said. Later, CFO Dave Wehner called these messages an “under-monetized resource ” within Meta.

The company has already built a big business in this area through advertising that leads to a conversation with users in a direct message.

“We started with click-to-messaging ads, which let businesses run ads on Facebook and Instagram that start a thread on Messenger, WhatsApp or Instagram Direct, so they can communicate with customers directly,” Zuckerberg said.

Zuckerberg said this business has a $9 billion annual run-rate, with growth so far coming mostly on Messenger, which is the messaging app that integrates with Facebook and Instagram. The version for WhatsApp, the encrypted messaging platform that is widely used internationally, was launched later and currently has a run-rate of $1.5 billion. It is growing 80% year-over-year, Zuckerberg said.

Ads may only be the start. The company is also laying the groundwork for businesses to be able to engage customers through direct messaging in more activities, including commerce.

This was on view through a recent partnership announced between WhatsApp and Salesforce. The integration creates tools so that businesses can use WhatsApp to answer customer questions, run marketing campaigns, and sell directly through chat. The partnership with Salesforce allows businesses to pull in data from across business functions, allowing brands and retailers to provide information about orders or chat for customer service. The feature may also result in opportunities for personalization. For instance, a message reminding a customer about delivery could add a discount to create an additional offer.

In India, WhatsApp partnered with Jio to create what Zuckerberg called the company’s “first end-to-end shopping experience.” This allows users to browse, select and order grocery items for delivery from a WhatsApp message. It could be just the first such partnership of its kind through WhatsApp.

There are some signs of direct ordering tools entering the chat in other Meta apps, as well. In July, Instagram introduced features that allow users to purchase and track orders from a brand within direct messages. This introduced conversational commerce features to Instagram, but the roadmap has yet to crystallize. It’s not clear how brands and customers will start conversations, and comes at a time when Instagram’s ecommerce strategy in general is in flux as the company tests alternatives to the Shop tab.

A screenshot of JioMart in WhatsApp. JioMart and WhatsApp teamed for in-chat shopping. (Courtesy photo)

Meta’s initiatives come at a time when direct messages are becoming a more prominent part of the social media experience overall. People want to connect, but have turned toward private areas to do so as the drawbacks of posting everything publicly online have come into view. Along with marketing, the one-to-one nature of direct messages could prove to make them a potential venue for sales, as well as post-purchase interactions. Gartner predicted that 80% of customer service organizations will abandon native mobile apps in favor of messaging by 2025.

Despite the multibillion-dollar business that Meta already built, the area of in-message commerce remains in the early stages of development. Questions to be worked out include whether people will engage with brands in a space that is typically understood to be private, how direct messages will be staffed to account for quick responses and the role of chatbots. Nevertheless, the ability to access a growing range of tools from a company like Meta will provide resources that allow brands and retailers to work these issues out.

For Meta, the inclusion of new messaging opportunities in the earnings call script comes at a convenient time. It is seeking new monetization opportunities as it faces tough competition for users from TikTok, and a potential $10 billion hit to its advertising business as a result of Apple’s App Tracking Transparency. Bigger bets like the company’s buildout of AI-powered recommendation engine for Reels and development of virtual reality technology for the metaverse are making avenues that generate short-term revenue especially attractive. With all of this going on, it's not clear how big of a focus messaging is for the company. Compared to those other topics, it received only a couple of lines in the call and less coverage in the analysis after the fact.

Yet there are reasons to think the messaging mention may not be a red herring. A $9 billion run-rate signals a substantial business has already been built, and Meta’s apps still attract large amounts of users and WhatsApp is built around direct messaging. Brands and retailers, too, are particularly interested in new tools at a time when ATT has made attribution more difficult.

While investors are debating whether the metaverse will reach wide adoption, Meta may be quietly working out its short-term path to grow revenue off to the side in direct messages.

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