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WhatsApp's Business App Holds Massive Potential

WhatsApp now has 50 million users on its WhatsApp Business app. The Facebook (NASDAQ: FB) subsidiary launched the app about two years ago, and it accumulated about 5 million users within the first year. The app has exploded in use in India and Brazil over the past year, with 15 million and 5 million users in those countries, respectively.

Many businesses moved from the consumer app to the business app to take advantage of the unique tools available in WhatsApp Business, and with more than 2 billion monthly active users, more still could follow.

There are two core functions for WhatsApp Business: providing customer service and facilitating transactions. Facebook's monetizing the customer service side of the business through a paid API, which further encourages business-to-consumer interactions on the messaging app. On the transactional side, WhatsApp's hit some stumbling blocks, particularly around payments. But it's laying the groundwork now to take advantage when it gets the opportunity.

Screenshots of the WhatsApp Business App

QR Codes and shareable catalogs are new features in WhatsApp Business. Image source: WhatsApp.

Making WhatsApp the place to contact businesses

WhatsApp developed an API for businesses to make it easier for them to message with customers. Businesses can use the API to respond to customers that reach out, but it's not for promotional messaging. In other words, the customer must initiate a conversation. WhatsApp Business users have 24 hours to respond for free, but using the API to respond after that period or reengage customers will cost them.

Facebook's latest effort to get customers to engage with businesses on WhatsApp is enabling QR codes that open conversations in WhatsApp. Instead of having to add a phone number to their contacts, users can scan a QR code to automatically open a conversation with the business, and the business can even prefill text for the customer. Placing the QR at a checkout counter, in a store window, on receipts, or on a shipping box could lead to a lot more engagement on WhatsApp.

QR codes could encourage more businesses to use the Business API or at least the WhatsApp Business App instead of the consumer application. It'll be easier to generate QR codes through the API for most businesses. That'll open the door for more monetization potential in the future.

Driving shoppers to WhatsApp

Shopping has been a major focus for Facebook recently. It introduced Checkout on Instagram last year and added Shops on Facebook earlier this year. WhatsApp has catalogs, and now businesses can make shareable links to products in their catalogs.

Catalogs allow WhatsApp Business accounts to easily share product details and images with potential customers. With shareable links, businesses will be able to easily drive traffic and get conversations started with customers through Facebook's other properties or their own websites. Such links could be the basis of a new ad format within Facebook or Instagram linking users to WhatsApp.

The biggest challenge for businesses that primarily use WhatsApp to communicate with customers is an inability to accept payments. WhatsApp has been working to offer payments in India and Brazil, but it's continuously run into roadblocks from regulators. A week after launching payments in Brazil last month, Brazil's central bank forced Facebook to suspend the feature.

If Facebook can manage to appease regulators to start enabling payments in WhatsApp, the FAANG stock could suddenly have a very lucrative source of revenue in WhatsApp. For now, driving more businesses to sign up for WhatsApp Business and its Business API should continue to make WhatsApp a key part of commerce in many markets.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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