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Facebook Messenger:
the Path to Monetization
By
Alan Alden
Series-A Partners
www.series-a.com
Page 2
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 3
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 4
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
The Messaging Holy Grail
Increased
Engagement
Balanced
Ecosystem
Reduced
Friction
The Move from Application to Platform
Page 5
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 6
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 7
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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%
Page 8
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 9
WeChat Emerging Markets
Case Study:
Content Acquisition in South Africa
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
Page 10
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 11
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
Monetization… Messenger’s Opportunities
Payments
3rd Party Content
App Store
Advertising
Identity
Management
Gaming
Travel B2B Services
(Facebook for Business)
Page 12
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 13
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
Monetization / Partnership Considerations
 Geography
 Age Group
 Frequency of Engagement / Usage / UX Impact
 Size of Opportunity
 Margins
 Impact on Existing FB Clients
Page 14
Vertical Analysis:
Travel and Leisure
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
Page 15
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 16
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 17
There Is An Even
Bigger Opportunity…
and
Facebook Has All of the Pieces in Place…
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
Page 18
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 19
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 20
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
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
Page 21
Thank You
Contact Information:
Alan Alden
alan@series-a.com
PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS

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Facebook Messenger: The Path to Monetization

  • 1. Facebook Messenger: the Path to Monetization By Alan Alden Series-A Partners www.series-a.com
  • 2. Page 2 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 3. Page 3 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 4. Page 4 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS The Messaging Holy Grail Increased Engagement Balanced Ecosystem Reduced Friction The Move from Application to Platform
  • 5. Page 5 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 6. Page 6 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 7. Page 7 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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%
  • 8. Page 8 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 9. Page 9 WeChat Emerging Markets Case Study: Content Acquisition in South Africa PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
  • 10. Page 10 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 11. Page 11 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS Monetization… Messenger’s Opportunities Payments 3rd Party Content App Store Advertising Identity Management Gaming Travel B2B Services (Facebook for Business)
  • 12. Page 12 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 13. Page 13 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS Monetization / Partnership Considerations  Geography  Age Group  Frequency of Engagement / Usage / UX Impact  Size of Opportunity  Margins  Impact on Existing FB Clients
  • 14. Page 14 Vertical Analysis: Travel and Leisure PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
  • 15. Page 15 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 16. Page 16 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 17. Page 17 There Is An Even Bigger Opportunity… and Facebook Has All of the Pieces in Place… PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS
  • 18. Page 18 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 19. Page 19 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 20. Page 20 PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS 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
  • 21. Page 21 Thank You Contact Information: Alan Alden alan@series-a.com PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS