Can WhatsApp Become Bigger Than Facebook Inc?

Though Facebook's recently announced Q1 2015's 40% year-over-year revenue growth and 20% earnings-per-share improvement didn't seem to wow investors, there were several undeniable wins. One pleasant surprise was Facebook's monthly average user, or MAU, growth. As big as Facebook already was -- it boasted 1.39 billion MAUs in 2014's Q4 -- it grew its user base by an impressive 50 million in the first quarter.

Daily active users, or DAUs, also jumped to 936 million, as did the number of mobile users to an unheard of 1.25 billion. Those are heady numbers and bode well for Facebook's future, particularly adding in CEO Mark Zuckerberg's initiative to bring connectivity to the world's under-served masses, and presumably even more MAUs. But as strong as this year has been for Facebook's user base, it has been dwarfed by the stunning rise of its messaging service, WhatsApp. In fact, WhatsApp is growing so fast, it could pass its parent's popularity before long.

How big is big?WhatsApp made a splash around the turn of the year when it announced it had surpassed the 700 million MAU mark. Considering that it had only been about a year since Facebook acquired the king of messaging for $19 billion -- and it had all of 450 million MAUs at the time -- the meteoric rise to 700 million was nothing short of incredible. Turns out, WhatsApp was just getting started.

CEO and WhatsApp co-founder Jan Koum said that as of last week, the messaging service had grown another 100 million this year alone to over 800 million. Like Facebook, that kind of explosive user growth is even more impressive when you consider its size. Though not quite an apples-to-apples comparison, by contrast Twitter gained a mere 4 million MAUs last quarter.

Twitter's stagnant user growth and engagement concerns haven't slowed investor's love affair with the tweet master -- its stock price is up over 43% this year. But at some point, the phenomenal growth of similar services like WhatsApp will start raising questions as to why Twitter is unable to keep up.

As for WhatsApp, Zuckerberg has said exploring monetization alternatives isn't part of the game plan until it hits the vaunted 1 billion MAU mark. At this rate, it's not inconceivable that WhatsApp could boast 1 billion users by the end of this year. Then the question becomes, what's next?

Where to go from hereRumors that Facebook would integrate WhatsApp into its own platform have been swirling since the $19 billion acquisition was announced, and have picked up steam as recently as a few weeks ago. However, Zuckerberg put to bed any questions about those rumors during his 2015 Q1 earnings call April 22 saying, "In terms of integrating them [WhatsApp with FB], no, we're not going to do that."

OK, so utilizing WhatsApp user data via integration with Facebook isn't going to happen, so when it does hit 1 billion MAUs, how will it be monetized? Zuckerberg has deflected that question on numerous occasions, but there are several alternatives which is why, according to some industry pundits, WhatsApp will become a $7 billion annual revenue machine in the coming years.

Some of the ideas for monetizing WhatsApp include fees for additional services associated with its free calling service, similar to Skype. Facebook is all about video, both ad-related and to enhance the user experience, so adding a video calling function is a revenue alternative that seems likely.

Another option is developing functionality that gives WhatsApp users the ability to participate in the mobile payments revolution. Mobile payments is expected to generate over $400 billion in sales this year, and approach $800 billion by 2017. With WhatsApp's continually growing scale and user familiarity, a payments solution would seemingly be a no-brainer.

The monetization of Facebook's Instagram and Oculus virtual reality headset Rift will likely kick in well before it sees a return on its WhatsApp investment. But as fast as it's growing, and with the financial and analytics force of Facebook behind it, WhatsApp will become a revenue monster: It's just as a matter of when. Who knows? By that time, WhatsApp may even be bigger than Facebook.

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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook and Twitter. 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.

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