The Historic Rise of Facebook Messenger

By Markets Fool.com

Image source: Facebook.

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Just like the British Empire of yore, today, the sun never sets onFacebook's (NASDAQ: FB) increasingly ubiquitous technology empire.

The company's rapid ascent is truly the stuff of tech legend. In just 12 short years, Facebook exploded from a project in a Harvard dorm room to one of the 10 most valuable companies in the world today. That's a remarkable winning streak, even accounting for the more rapid pace of change characterized by today's business climate.

What's more, the company's continued investments in emerging areas of tech like messaging platforms and virtual reality promise to help it remain on tech's bleeding edge for years to come, something another recent event at the company powerfully reiterated.

Facebook Messenger tops 1 billion users

According to a blog post from the company, Facebook's Messenger application recently surpassed 1 billion monthly active users (MAUs).

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Image source: Facebook.

For those scoring at home, this makes Messenger the third Facebook-owned product to breach the 1 billion MAU milestone. Facebook's eponymous social media property achieved this incredible feat in 2012. Today, 1.65 billion users access Facebook's flagship service monthly. This past February, Facebook's WhatsApp subsidiary also joined the billion-user club.

This torrent user growth isn't likely to stop there, either. Facebook's visually immersive social network Instagram, with its 500 million MAUs and counting, appears the most likely candidate, aside from Snapchat, perhaps, to potentially achieve this remarkable feat.

Facebook's Messenger was already popular prior to the parent company's decision to spin out the product as a stand-alone service in 2014. At that point, Messenger already counted 500 million users, but the decision, as well as the rising popularity of messaging apps globally, helped power the product's feat of doubling its user count in a mere two years. And now that the service exceeds this critical threshold, investors should expect the service to place a greater emphasis on monetization in the company quarters.

Now things get interesting

As Facebook CEO Mark Zuckerberg once stated on an earnings conference call, "This may sound a little ridiculous to say, but for us, products don't really get that interesting to turn into businesses until they have about 1 billion people using them," If that's the case, Facebook investors have every reason for excitement. But what could Messenger's profit potential look like?

Image source: Facebook.

As a proxy, let's quickly examine undoubtedly the best publicly traded proxy wehave for Facebook Messenger, recent IPO bright spot Line (NYSE: LN). In its IPO prospectus, Line disclosed it produced just under $1.1 billion in revenuewith just 218 MAUs, good for an average revenue per user (ARPU) of $4.93 and growing.

Line takes a different tactic than Facebook, at least up until this point, in monetizing Messenger. Line generates the bulk of its sales from the sale of games, stickers, and other advertisements. Conversely, Facebook appears more interested in monetizing Messenger by collecting fees from companies to access its platform. So far, over 700 different corporate apps have been created for Messenger, ranging from customer service chats to airline booking questions.

Taking that into account, there's a legitimate case to be made that Facebook's profit potential in Messenger lies well in excess of Line's still-impressive ARPU stats; Facebook can tap into revenue streams from platform access fees, stickers, and advertisements, like Line does. However, for the sake of illustration, simply applying Line's ARPU stats to Facebook's billion-plus user base implies a sales potential of nearly $5 billion. For context, Facebook produced $17 billion in sales last year, with the overwhelming majority of that coming from its core social networking service.

Especially since Facebook largely shunned monetizing its mammoth messaging platforms Messenger and WhatsApp, it seems the public has mostly overlooked their immense financial potential. However, with Messenger recently surpassing 1 billion users, that might not be the case for much longer.

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Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.