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Facebook Messenger:
the Path to Monetization
By
Alan Alden
Series-A Partners
www.series-a.com

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Messaging: The Fastest Growing Platform
1.4
Billion
Current Users
2.5
Billion
2018
PROJECTED ADDITIONAL USERS
BY GEOGRPAHY
579
265
244
73
45
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

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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

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The Messaging Holy Grail
Increased
Engagement
Balanced
Ecosystem
Reduced
Friction
The Move from Application to Platform

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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

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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

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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%

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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

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WeChat Emerging Markets
Case Study:
Content Acquisition in South Africa
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Cliffcentral.com
WeChat 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

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Monetization… Messenger’s Opportunities
Payments
3rd Party Content
App Store
Advertising
Identity
Management
Gaming
Travel B2B Services
(Facebook for Business)

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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

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Monetization / Partnership Considerations
 Geography
 Age Group
 Frequency of Engagement / Usage / UX Impact
 Size of Opportunity
 Margins
 Impact on Existing FB Clients

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Vertical Analysis:
Travel and Leisure
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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

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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

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There Is An Even
Bigger Opportunity…
and
Facebook Has All of the Pieces in Place…
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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

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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

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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

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Thank You
Contact Information:
Alan Alden
alan@series-a.com
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