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How the Tech Industry Is Shaping Up

PART:
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Part 5
How the Tech Industry Is Shaping Up PART 5 OF 6

Why Facebook Wants Ads on Its Messenger App

Facebook will start displaying ads in Messenger to boost revenues

Facebook (FB) will start showing sponsored ads in its Messenger app. The chat app is currently being used by 1.2 billion people, as the graph below shows. These ads will eat up close to 66.0% of the screen and likely significantly alter users’ experiences.

Why Facebook Wants Ads on Its Messenger App

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The ads will be inserted between users’ messages, just like ads are shown between posts in Facebook’s news feed. This move comes amid slowing revenue growth. The company’s earnings in fiscal 1Q17 rose as its monthly users surged. However, its expenses are rising, and revenue growth is slowing down.

Why Facebook wants ads on Messenger

More ads may give Facebook an even larger bite of the online advertising revenue market share. The company currently has a 37.0% share of the market, second behind Google (GOOG) with a 40.0% share, according to eMarketer.

As Facebook runs out of space to show ads in its news feed, the company has been looking for different avenues to make money. It has been thinking of strategies to make money from WhatsApp, which, like Facebook’s Messenger, has 1.2 billion monthly users, according to Facebook. Estimates by Barclays Capital show that the social media giant could earn an additional $11.0 billion in revenue from WhatsApp and Messenger by 2020.

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