SunTrust Lists Ramifications For Facebook Investors To Consider

In a report published Monday, SunTrust analyst Robert Peck questioned how Facebook's FB newly-acquired WhatsApp will ultimately monetize.

In the note, Peck reviews the initial two phases of the Facebook/ WhatApp deal. Phase 1, or the reaction to the deal from investors, has undergone the appropriate reaction with shock and ultimately acceptance. In the second phase of questioning, the analyst focuses on monetization concerns.

Robert Peck wrote, "Were the founders Jan Koum and Brian Acton really serious about their disdain for advertising which they had been vocal about historically. Many investors alluded to David Karp, the CEO of Tumblr who originally didn't like advertising, but adapted to embrace some forms of it going forward. We had many conversations about this topic and we believe there are 2 things for investors to expect: 1) WhatsApp will not monetize through advertising, 2) WhatsApp's monetizing goal is….. Payments."

The SunTrust analyst focused on five main ramifications for investors to consider, given an individual investor's belief that WhatsApp and Facebook will have a "significant" role in mobile payments.

Peck first reports that there is likely only one revenue stream for WhatsApp. He noted that commerce, upgrade options, subscription, and "freemium" are some other potential revenue streams. Secondly, the analyst notes that other payment players including PayPal, Google, Amazon, and Apple may ned to "consider their competitive positioning vs. gigantic Facebook / WhatsApp user base." Thirdly, SunTrust remarked that competitive messaging apps will likely need to adapt to the changing competitive landscape. Concluding with his last two points, Peck questions how traditional payment players (Visa and Mastercard) and carriers will adapt. With this evolution, the analyst questions how carriers can "not only protect their lucrative SMS businesses, but also participate in payments."

Shares of Facebook closed at $68.59 on Friday.