Advertising models in mobile messaging apps

Posted on February 29, 2016 by Eric Benjamin Seufert

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In mid-February, a leaked document allegedly originating from Facebook indicated that the company plans to integrate ads into Facebook Messenger in the second quarter of this year. According to the document, the ads will only be sent in message threads that users had previously initiated with brands, in a sense rendering them “opt in”. Facebook Messenger boasts 800MM monthly active users (as of early January 2016, up from 500MM in late 2014) and appears to be a central component of Facebook’s app portfolio (along with WhatsApp, Instagram, and, of course, the Facebook app).

That Facebook would allow for advertising within messenger has seemed a foregone conclusion for a while, given its M&A activity and initiatives in the Facebook mobile news feed. In March 2015, ahead of the f8 conference, I wrote the following:

Perhaps, but that doesn’t appear to be the biggest opportunity for Facebook in expanding Messenger beyond its current set of functionality (which includes text, voice, and video messaging as well as sticker distribution and now peer-to-peer payments). Rather, Facebook may take on Snapchat — specifically, its Discover feature — in creating advertising opportunities for brands through content channels offered on Messenger.

Some recent cues from Facebook point to this. The company acquired LiveRail, a video advertising company, in July 2014 to improve its targeting capabilities for ad serving, and it was recently reported that the LiveRail team might be building out cross-device ad serving infrastructure to target Facebook users across multiple devices. This would create an interesting opportunity for brands to advertise with Facebook: not only could they reach users on desktop and mobile with Facebook’s premium video ad product but also potentially in a new, native video ad placement in Messenger similar Snapchat Discover, which is commanding $100 CPMs from advertisers.

Assuming that brand “interaction” is the next big advertising opportunity on mobile, but especially on mobile messaging services, it makes sense to examine the current forms that advertising on mobile messaging take.

The first is the “opt in” content channel, which both Kik and Snapchat utilize. In Kik, advertisers can pay to have their brands visible at the top of the “Promoted Chats” tab. When users engage in a chat with the brand’s account, the account is able to send those users ad-like content and respond to questions from users with relevant content via keyword-sensitive “bots” (eg. if a user asked something like “Where’s your closest retail store to me?”, the bot would respond with a link to a store finder. Kik features a native browser for loading external content).

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Snapchat uses a similar model with its “Discover” tab; advertisers can pay to have their channel icons placed in the Stories tab / content space, and when users click on those icons, they’re exposed to the advertisers’ snaps and text content.

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Messaging apps Tango and BlackBerry Messenger also offer brands the ability to promote content channels.

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WeChat, the Chinese chat app owned by Tencent, also offers sponsored content placements through its WeChat moments feed.

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A second current model is the “disguised CRM” format, wherein users initiate conversations with corporate accounts ostensibly for the purposes of customer service and are subsequently exposed to ads. This is the form that Facebook’s messenger ads are presumed to take (given that the information in the aforementioned leaked document is accurate), and it also seems like the most fitting format for any potential ads in WhatsApp (although both Mark Zuckerberg and WhatsApp founder Jan Koum have publicly dismissed advertising as a potential monetization mechanic for WhatsApp).

Twitter has also rolled out a CRM-like discussion feature for company accounts (allowing users to move public conversations into the privacy of the direct message chamber), although this is not an advertising unit and it seems designed solely to prevent people from airing their grievances with companies in the open (for an example of this, do a Twitter search for “united airlines terrible“).

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The disguised CRM format is interesting because, conceptually, it’s much more “native” (in terms of functionality) than other professed native formats, given that the use case of a chat app is conversation. The problem, of course, is that maintaining a discourse in a person-to-person exchange is laborious; perhaps Facebook’s investment into its artificial intelligence lab, as well as Mark Zuckerberg’s very public interest in artificial intelligence, provide some clues here into the types of tools Facebook might be able to offer advertisers on this front in the future.

A third advertising model on mobile app chats is pretty straightforward: unavoidable “sponsored content“. Tango has utilized this format in its app by offering advertisers the ability to purchase ad units that appear alongside content in the app. Tango has taken this approach with its “native” ad units — purchasable through MoPub — that appear in the newsfeed and in various other places within the app (for other examples, see this article).

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Japan’s LINE app has taken an interesting approach to allowing brands to advertise to users. LINE allows companies to purchase the ability to publish customized stickers in its sticker store; once a user has purchased a branded sticker, the company that published that sticker is able to directly message that user. But whether or not the sticker is purchased, it’s still present in the store as a form of advertising for the brand.

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Facebook, too, has partnered with certain companies to make branded stickers available, although this hasn’t been a monetized advertising format:

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As mobile chat continues to evolve towards the bedrock of consumer technology on mobile — the foundation from which other, more specialized types of apps are launched and connected together — it will be interesting to witness how advertising formats within the chat context mature.