Opinion

What does the integration of WhatsApp, Instagram and Messenger mean for the ad industry?

If Facebook’s goal for this integration is to create a unified user ID across all their chat platforms, this would positively affect their advertising product through frequency and sequential ad management – writes Ben Poole of Reprise

The integration of WhatsApp, Instagram and Facebook Messenger. What does it all mean? This latest revelation has produced more questions than it has generated answers.

Everybody is speculating about what it will mean for the user experience and user privacy. There have been fewer questions about what it will mean for advertisers. I’ll attempt to answer some of these.

The business and advertising context

Facebook chief executive officer Mark Zuckerberg has a business model (advertising) that is dependant upon people spending as much time as possible within the environments that he owns. The more time that people spend in his ‘family of apps’ – as Facebook Inc refers to Facebook, Messenger, Whatsapp and Instagram – the more Zuckerberg can monetise this attention with ads.

Facebook has a quite incredible track record of monetising its user base. In the last quarter of 2018, its net income totalled $6.88bn; a record profit and year-on-year increase of 61%. Its average revenue per user was $7.37, a 21% increase from the previous quarter. Monthly active users across its family of apps stands at 2.7bn.

Facebook’s successful business model has been driven by three key factors:

  1. A ‘people marketing’ proposition to advertisers, thanks to registration data.
  2. Precise targeting combined with audience scale.
  3. A self-service ad buying platform that attracts everyone from large corporates all the way down to tiny small and medium-sized enterprises.

The privacy context

Facebook has a mixed track record when it comes to privacy, the Cambridge Analytica scandal being the most widely known incident. The topic of privacy has caused the most debate with the news that Facebook plans to integrate the back-end infrastructure of its WhatsApp, Facebook Messenger and Instagram Direct Message services.

At the heart of the debate surrounding this latest news is encryption. WhatsApp messages are end-to-end encrypted by default. Facebook Messenger only offers the feature if you opt-in to ‘secret conversations’. Instagram does not currently offer any form of end-to-end encryption.

Zuckerberg has stated that he wants end-to-end encryption across all of his messaging platforms. This raises some fundamental questions:

  • Will end-to-end encryption be opt-in or opt-out? If Facebook Messenger chat becomes encrypted by default, Facebook Inc will lose valuable targeting data for advertisers.
  • How will end-to-end encryption be explained in simple terms to the end user? What choices will they be given, if any?
  • If one platform is encrypted and another not, then when a message passes between these two platforms is it encrypted or not?

European watchdogs have already demanded an explanation as to how this work and whether it will be GDPR compliant. Whatsapp’s recent plans to share personal data with Facebook were prevented by the United Kingdom’s Information Commissioner, who declared the data transfer illegal. Regulatory scrutiny will persist. However, default message encryption across all chat platforms could in fact be a positive outcome for the consumer.

User experience and possible user attrition – a unified ID?

To set up Whatsapp requires just a phone number. Facebook requires your real name. People have different identities and ‘names’ across the different platforms. They use the platforms in different ways to communicate with different people.

People’s attention has migrated away from Facebook towards Instagram and WhatsApp. They would be aggrieved if a cross-platform unified ID tried to force them back in to a Facebook platform that they don’t want to use.

If Facebook’s goal for this integration is to create a unified user ID across all their chat platforms, this would positively affect their advertising product through frequency and sequential ad management. It will also open the door to a people marketing-based ad product on WhatsApp.

But a unified cross-platform ID may not be what its users actually want. We would see some attrition in its WhatsApp user base, and with the high growth of global competitors – Line and WeChat – there would be some transferral of users to those platforms.

The implications for advertisers

We are some way off from this integration happening. Rumours are that it will commence late 2019 or even 2020. This is a long-term play from Facebook Inc about which we have precious few details. For advertisers using Facebook, Instagram and Facebook Messenger we do not expect to see material changes in the next 12 months.

If Facebook succeeds in achieving a unified view of users across the family of apps, then the potential for a WhatsApp ad product are obvious. As ever, Facebook will have to be conscious of its ad load percentages – the amount of ads that a user sees in their feed – but successes that we have seen to date with Messenger point towards Facebook managing the balance between ads and content well.

For businesses using Messenger and Whatsapp as customer service tools, we would expect to see great advantages in getting to a single view of a known customer across the family of apps.  From a communications point of view, a more seamless contact experience across apps would benefit both consumers and brands.

The future

We are very much at the ‘wait and see’ stage of this development. Given its sheer size and influence on society, Facebook is under greater scrutiny than ever before. Privacy and regulatory bodies will demand answers to questions around this integration. Once these answers are forthcoming, we will have more visibility on what it means for the advertising community.

Poole is taking a ‘wait and see’ approach

Ben Poole is Asia-Pacific managing director at Reprise Digital, part of the IPG group

ADVERTISEMENT

SUBSCRIBE

Sign up to our free daily update to get the latest in media and marketing