What's driving Meta's revenue gain from click-to-message ads?

The phenomenal growth of click-to-message ads shows the potential of conversational marketing; advertisers are ready to pay a premium due to the extensive user base & targeting options, say experts

by Nilanjana Basu
Published - November 09, 2023
5 minutes To Read
What's driving Meta's revenue gain from click-to-message ads?

India is one of Meta’s largest markets and as per CEO Mark Zuckerberg’s earnings call affirmations the tech giant’s revenue from click-to-message ads in India, across platforms like Facebook, Instagram and WhatsApp, has doubled during the September quarter. He even mentioned that more than 60 per cent of WhatsApp users in India message a business app account every week.

As per latest reports, WhatsApp has over 500 million users in India. Zuckerberg also said that a majority of 'commerce over messaging' is currently happening in countries where the "cost of labour is low enough that it makes sense for businesses to have people corresponding with customers over text".

According to Chirag Bhatia, EVP & Business Head – Digital, Mudramax, consumer insights show a clear preference for chatting or messaging businesses instead of making phone calls. “According to a Kantar research study commissioned by Meta, a remarkable 86 per cent of adults engage in messaging with businesses at least once a week. This is way higher than the global average of 66 per cent. The survey indicates that Bharat (India) wants to converse with businesses exactly the way they stay connected with their family and friends.

In this age of business experience and digital transformation, consumer expectations have evolved significantly, particularly amongst younger generations who demand instant revert, anytime, anywhere. It’s the so-called ‘NOW’ generation. This builds a solid business case for messaging platforms’ usage by businesses, with WhatsApp leading the pack.”

“Post attending the Meta Conversations global event that happened in Mumbai last month, it is apparent that WhatsApp has built features like payments, AI/ML-enabled interactive business messaging, and catalogues/collections coupled with a solid partner ecosystem to enable these for businesses,” Bhatia shared.

“This also adds value to consumers’ life, translating into a win-win situation where not only consumers are happy as it makes their life easier but also translates into a exponential revenue growth for Meta via the WhatsApp for business platform,” he added.

Meanwhile, Shradha Agarwal, Co-Founder & CEO, Grapes, said: “The phenomenal growth of the click-to-message ads shows the potential of conversational marketing. Personalisation has always been a key attracting factor for consumers and being able to directly connect with the brand, pushes people to interact more with the ads. So, investing more in this format could prove beneficial for businesses. But that is not to say that all other relevant ad models should be discarded on the back of one bad year.”

Competitive CPM - Avenue for Growth

Meta also has a competitive cost per mile or cost per thousand impression rate. Experts suggest that while this cost keeps increasing, they might have to increase their ad inventory as well since it continues to be a bellwether of the digital marketing industry. The company’s click-to-message ad revenue growth in the country will also be a factor in driving these numbers, they said.

With this increase in demand for its messaging application as well as a large user base in all of its applications, industry experts think that the price has become competitive for the platform’s ads in India.

Rahul Vengalil, Executive Director, Everest, Rediffusion Group says, “The units for Meta is Cost per Click (CPC) or Cost per Milli (1000) Impression (CPM) or cost per thru play (a view is 15 sec views). Most of the buys that brands have are either CPM, CPV or at times CPE (Cost Per Engagement). We have seen a slight increase in unit costs over the last few months. The platform isn't adding new users, which means the available ad inventory will now have to be increased with higher time spent on the platform. That is also reaching a saturation or decrease in places. In this scenario, the available inventory is not growing, whereas advertisers who want to experiment or sustain the spending on meta platforms are increasing. Given this, the ad inventory cost will see a gradual increase.”

According to Mitesh Kothari, Co-founder and Chief Creative Officer, White Rivers Media, the current trends reveal an average cost-per-click for Instagram ads at approximately $0.80. “This figure aligns with the broader industry standard, where Instagram ads typically range between $0.70 and $1.00 per click. However, it's crucial to emphasize that the cost of your Instagram ads can be influenced by numerous variables. In this ever-evolving landscape, staying informed about such trends is essential to provide the best value and outcomes for our clients.”

As for Ashish Shah, CEO & Founder, Vertoz, the cost per ad for Meta has been on the rise for a few years now. "The price per ad trend for Meta platforms, including Facebook and Instagram in India, has shown a steady increase in the recent years. Advertisers are willing to pay a premium for advertising on these platforms due to their extensive user base and sophisticated targeting options. The exact pricing can vary depending on factors such as the ad format, targeting parameters, and competition within specific industries."

Bhatia also believes that Meta’s AI/ML powers will be a driving force for the ad costs. “When we think of social media, we think of Facebook and Instagram and when we think of messaging, we think of WhatsApp, all of which are from Meta. While other alternatives exist, it's going to take a while before Meta's products face disruption.”

On a lighter note, Bhatia shared that the average person's thumb covers the distance of two marathons (52 miles) per year scrolling through Meta apps like Facebook and Instagram. “This generates a massive ad inventory, making Meta's supply huge. That's why CPMs on Meta platforms are highly competitive and around 50 per cent cheaper than other managed platforms. With a vast supply pool in India and worldwide, coupled with their deep user insights, Meta's AI/ML-enabled micro-targeting segments make advertising incredibly effective on the platforms.”