Meta will launch ads on WhatsApp. Why is this important for investors?

Meta Platforms, which generates advertising revenue through its Facebook and Instagram apps, has begun phasing in ads to WhatsApp, a messenger used by more than 3 billion people a month, starting June 16. This will boost revenue, but violates the rules of WhatsApp's creators, who promised that it would never have ads.

Ads on WhatsApp will be displayed in the "Status" section on the bottom left of the app's screen, the company announced. This solution will allow ads to be separated from the main personal chat space.  "This has been a long-standing request from businesses, but it's important for them to preserve users' personal space," said Nikhila Srinivasan, vice president of business communications at WhatsApp.

WhatsApp will use user data such as device location and language, information about channel subscriptions and ad interactions to customize ads.

The Financial Times recalls that before WhatsApp was acquired by Facebook for $19 billion in 2014, the service's co-founder Brian Acton promised, "No ads! No games! No gimmicks!" Meta stated that the company decided to move away from that long-held stance precisely when it became possible to place ads in such a way that they don't interfere with conversations. 

Meta also said that channel administrators will be able to promote their channels in search - similar to advertising in the App Store or Google Play. They will also be able to charge a monthly fee for access to exclusive content. Meta will not take a commission from these subscriptions for now, but plans to retain 10% in the future.

Until now, Meta's efforts to monetize WhatsApp have focused on Facebook and Instagram click-to-message ads, reminds CNBC. These are links that trigger a dialog between users and brands on either WhatsApp or the Messenger app. "Messaging between companies and customers should be a new pillar of our business," Zuckerberg said of the feature in April.

He said WhatsApp's monthly audience has surpassed 3 billion people, including more than 100 million in the US. According to the company, about 1.5 billion users visit the "Status" tab, where ads will appear, every day. WhatsApp Meta does not disclose revenue, but analysts previously estimated it at between $500 million-$1 billion a year from paid business tools, wrote CNBC. The company also did not name expected advertising revenue from the messenger.   

In its most recent quarterly report Meta Platforms reported that its ad revenue totaled more than $41 billion.In 2024, the company received 22% more from ad sales than it did in 2023 -a figure that exceeded $160 billion and accounted for about 98% of the company's total annual revenue.

On Sunday, even before Meta's plans to introduce ads on WhatsApp were published, analysts at Oppenheimer raised their target price on the company's stock from $665 to $775, suggesting a potential upside of 10%. The analysts cited an improving outlook in the advertising market. They suggested that Meta could see further growth in ad revenue thanks to "higher than expected monetization from Instagram, Stories and video."

Investors reacted positively to the news about the launch of advertising in WhatsApp: Meta securities rose by 2.9% to $702.1 in trading on Monday. Since the beginning of the year, they have added almost 20%, outperforming the Nasdaq Composite index of technology stocks.

Meta shares are advised to buy by 61 analysts out of 71, whose ratings are considered by MarketWatch. MarketWatch. Seven recommend holding the company's securities in the portfolio and only two suggest selling. However, Wall Street does not expect further growth of Meta's quotations yet: the consensus price is almost $700 per share, which is approximately the same as the current value.