Nowhere to go: SMBs say WhatsApp Business API pricing hurting budgets but lack other options

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Jun 04, 2023

Nowhere to go: SMBs say WhatsApp Business API pricing hurting budgets but lack other options

In Depth Wednesday June 07, 2023, 7 min Read Key Takeaways Meta-owned messaging

In Depth

Wednesday June 07, 2023,

7 min Read

Key Takeaways

Meta-owned messaging app WhatsApp has over two billion monthly active users worldwide, with 500 million being from India alone. WhatsApp Business, a mobile application for small businesses, and WhatsApp Business API enjoy a similar strong network effect.

With WhatsApp revising its pricing policy for business messaging from June, small to medium business (SMB) owners are not only worried about the costs eroding their marketing budgets but are also concerned about the platform's potential to establish a monopolistic hold on communication.

"The market for WhatsApp is so huge and the market penetration is so deep that it is almost impossible for an existing user to exit the platform," says Anubhav Bansal, Founder, HealthMug, a Delhi-based online healthcare platform.

WhatsApp has revised pricing for its Business API (application programming interface), which is designed for larger companies with huge messaging volumes. It offers tools such as automated replies, chatbots, and other interactive features that help companies connect with multiple users at scale.

WhatsApp Business, which is tailored for smaller businesses, remains free to use.

"As of now, I do not see any other platform as an alternative to WhatsApp. It is so widely used by people in our country that I do not see shifting to any other channel for communication," says Meghana Manay, COO, SR Gopal Rao, a Bengaluru-based optical company.

Naman Dhamija, the Founder and Marketing Director of Dharishah Ayurveda, believes that WhatsApp is a revolutionary tool for marketing, with conversion rates for them being 30-40% for leads. "Using this platform, the company successfully acquires thousands of customers on a monthly basis," he says.

"Shifting to other platforms can be time-consuming and costly for small businesses like ours and no other platform offers the same level of accessibility and user base," says Dikshita Sharma, Founder, Chilzo, a Mumbai-based sauces and condiments brand.

While WhatsApp Business doesn't figure prominently in Meta's earnings reports, it is one of the green shoots for the company.

During the release of Meta's Q1 2023 results, CEO and Founder Mark Zuckerberg said the number of businesses using the company's "other business messaging service– paid messaging on WhatsApp–has grown by 40% quarter-over-quarter."

Although Meta doesn't disclose revenue data for WhatsApp Business, the ‘other revenue’ generated by its Family of Apps category (which includes Facebook, Instagram, WhatsApp, and Messenger) in Q1 2023 was $205 million compared to $215 million in the same quarter of the previous year. This revenue figure represents the income generated from sources other than advertising or user subscriptions.

The decrease in revenue was primarily attributed to a decline in certain line items within the category, the company said. However, it also highlights that the decline in revenue was partially offset by strong growth in business messaging revenue from the WhatsApp Business Platform.

WhatsApp follows a conversation-based pricing model, where each conversation over a 24-hour period, rather than a message, is priced. It has now changed the way it categorises these conversations.

Business-initiated conversations are now divided into utility, marketing, and authentication conversations while the user-initiated conversations are now called service conversations. Businesses can initiate a conversation using a template message. The category of the template message used will define the conversation category. Earlier, businesses were charged flat Rs 0.48 for business-initiated conversations for a 24-hour customer service window.

(Graphic design by Nihar Apte)

WhatsApp will now let you edit your messages

Companies will now be charged differently for different conversation categories. For marketing or promotional messages, the price has increased to Rs 0.72 while for utility conversations— such as transaction confirmations, transaction updates, and post-purchase notifications — it has dropped to Rs 0.30.

Commenting on the changed prices, a WhatsApp spokesperson said, "We charge businesses using our WhatsApp Business Platform for the conversations they have with their customers, and make occasional adjustments to our offerings to better reflect the ways in which the service is used and the types of information people are choosing to receive."

The revised policy could have a significant impact on the marketing and customer acquisition costs of SMBs.

"Our promotions on WhatsApp will cost us around 50% more now. If we were spending Rs 10 lakh on promotions every month, the same will charge us around Rs 15 lakh," says Naman Dhamija of Dharishah Ayurveda.

Dhrishah Ayurveda had plans of targeting around 30,000 people in a month sending them promotional messages weekly. The 1.2 lakh conversations were estimated to cost Rs 60,000 for the company. "Now it will cost Rs 90,000 so we might reconsider our strategy," says Dhamija.

"At present, we are mostly sending utility messages. We expect a 20% reduction in cost for those. Marketing messages will have a higher cost-per-lead (CPL) only when we indulge in marketing on a large scale," says Bansal, Founder, HealthMug.

Deepak Kumar, Founder of Kinu Baby Care says that the increased cost, which can be around 50-60%, is going to be a big burden for small businesses like them. "This is an extra expense for us but we also know that WhatsApp is the easiest channel to stay in touch with our customer base," he adds.

Dhamija also pointed out that the selected template category gets approved by the platform (Meta AI) which sometimes publishes the template in the wrong category. "Some utility messages were taken as promotional," he says.

Meta says that users can file an appeal to change the template category which then gets re-reviewed. "We submit templates through a BSP (Business Service Provider providing Whatsapp API Services) and we do not have an option where we can appeal for this," Dhamija adds.

Other than the large user base that WhatsApp offers, the Business API platform has features such as automated messaging, quick replies, cataloguing, and payment integration.

"The API tools are very convenient to use. WhatsApp offers an additional benefit of user-familiarity, catering to individuals residing in smaller towns and rural areas," says Kumar of Kinu Baby Care.

"Also, the older generation who has not grown up in the digital era is well-acquainted with navigating the platform. They do not use our website but contact us using our phone number. Giving them personal assistance becomes easier," adds Dhamija.

According to Bansal, the open rate (percentage rate at which messages are opened) for WhatsApp ranges between an impressive 70-80%, surpassing the significantly lower rates of 5-10% for SMS and 10-15% for email. With similar costs for utility messages and SMS, businesses are expected to increasingly gravitate towards WhatsApp as the preferred channel. Another advantage that the platform gives is the 24-hour window where users can send any number of messages within a template.

"The increase in marketing prices can be good from a consumer perspective. They wouldn't be receiving too many promotional messages in their inbox. However, a decrease in prices for utility messages will bring more traction to the platform," Bansal says.

Recently, WhatsApp users in India took to Twitter to call out the spam texts and calls they were getting on the platform from different international numbers. In its latest India Monthly Report, under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, the company said it banned 74 lakh Indian accounts in April.

The rising costs associated with WhatsApp may prompt businesses to explore alternative options such as using social media platforms for their marketing activities. Telegram, for instance, provides a viable alternative for businesses and distinguishes itself by offering the free Telegram Business API in contrast to the paid WhatsApp Business API.

Telegram's emphasis on privacy has attracted a substantial user base, with over 200 million downloads in India.

This shift to alternative platforms, however, can be disruptive and time-consuming, requiring businesses to adapt to new systems and potentially impacting their customer relationships.

"Shifting to other platforms would require rebuilding customer bases and training employees on new systems, which can be time-consuming and costly for small businesses like ours," says Sharma. "The fragmentation of customer communication across multiple platforms could further complicate operations, potentially impacting customer satisfaction and affecting growth," she adds.

Edited by Affirunisa Kankudti

WhatsApp Business API

Pricing strategies

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Nowhere to go: SMBs say WhatsApp Business API pricing hurting budgets but lack other options