Meta wisely ramps up efforts to make WhatsApp a moneymaker
Meta Platforms is taking a major step toward awakening the sleeping giant of WhatsApp, sending shares of the Club name higher on Monday. The social media giant announced Monday that it is bringing advertisements to a select corner of WhatsApp known as the "Updates" tab, where users can post status updates — basically like an Instagram story — and see content from the business "channels" they've chosen to follow. Ads will now be shown within the status section of the Updates tab, and businesses will also be able to pay to promote their channel within that brand feed. In another monetization initiative, users can sign up for a monthly subscription to receive exclusive updates from their "favorite channel," such as a news network. "Subscriptions, promotions and ads will appear only on the Updates tab, away from your personal chats. This means if you only use WhatsApp to chat with friends and loved ones, there will be no change to your experience at all," the company said in a press release. Investors have for years viewed Meta's WhatsApp and Messenger platforms as large, untapped sources of revenue growth, given their massive user bases and — until now — minimal monetization initiatives. In 2014, the company then known as Facebook bought WhatsApp for $19 billion. Previously, Meta's main focus to make money from WhatsApp was paid business messaging features, which generate around $1.5 billion to $2 billion in annual revenue, Wolfe Research estimated earlier this year . That's small potatoes for a company that raked in $164.5 billion in sales last year, primarily through ads on Instagram and Facebook. Advertisers want to go where the eyes are, and WhatsApp has a lot of them — 1.5 billion daily users, in fact, Meta noted in its press release Monday. WhatsApp is generally less popular in the U.S. than it is abroad, where its ability to send messages over the internet instead of relying on more-costly SMS texts had huge appeal in its early days. In our view, Meta's move to bring these ad changes to the Updates tab alone is a smart one. The market reaction, with the stock up more than 3% to roughly $703 a share, suggests we are not alone. WhatsApp is primarily an encrypted messaging app. So, while investors have wanted to see more monetization take place on app — given its large reach, especially with businesses increasingly use it to connect with customers — it is smart to interfere as little as possible with the day-to-day messages users share with friends and family. After all, what good is monetization if change leads to a deterioration in the user experience? That's also why Meta is smart to emphasize that, despite these ad changes, it is keeping the encrypted nature of the app. In other words, your daily chats won't be used to determine what ads to show you —indeed, end-to-end encryption means that nobody can access your conversation, not even Meta. Instead, the company said in its press release that it will "use limited info like your country or city, language, the Channels you're following and how you interact with the ads you see" to show relevant advertisements. The bottom line? We're thrilled this long-awaited move is coming to fruition. It's being done in a measured way, so as not to degrade the user experience of its bread-and-butter use case, and it should set Meta up for further advertising growth in the quarters ahead. The timing is also significant, as ad buyers are no doubt reassessing where they want to spend their marketing budgets given the rapid adoption of artificial intelligence chatbots to search the internet. The shift in consumer has important, yet-to-be-settled implications for Meta's key advertising competitor in Google parent Alphabet. (Jim Cramer's Charitable Trust is long META. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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