Facebook & friends – Internal affairs

Facebook’s messaging mess highlights a problem for everyone.

• The number of attempts Facebook is making to crack the millennial messaging market is growing fast and with it the bill for shareholders.
• Facebook’s travails also highlight a very significant problem faced by all of the ecosystem contenders when it comes to developing their Digital Life offerings.
• Many contenders are using M&A to grow their way around the Digital Life pie but unfortunately the reality is much more complicated.
• Facebook seems to be desperately trying to win back the younger part of its user base by trying to address the success of Snapchat.
• Following its failure to create a clone, it then tried to buy the original and when that failed, it returned to trying to copy it.
• Its first attempt called Poke failed after a couple of months, Slingshot has suffered a similar fate and now Facebook is trying again with Bolt.
• Bolt is a standalone app. that is derived from Instagram that effectively replicates the functionality of Snapchat.
• So far the signs are quite good but it has only been launched in New Zealand, Singapore and South Africa.
• These efforts also go hand in hand with the Facebook chat app. and the WhatsApp acquisition to make a very confusing messaging strategy.
• It looks like Facebook is trying to hang onto the younger generation of users many of whom have been put off the main service by the arrival of their parents onto the system.
• Facebook now has at least three separate messaging strategies for a single service that are all separate and distinct from one another.
• The value to Facebook of messaging would be many times greater if all of these services were able to interact with each other.
• Unfortunately, the agreements made at acquisition seem to ensure that the acquired entities remain separate and continue to operate independently.
• If this remains the case then Facebook will never be able to take WhatsApp into gaming or integrate it with its other services.
• In my mind this is the only way in which Facebook can have a hope of earning any return on the $19.6bn of shareholder’s money that it invested in acquiring this company.
• This is the most striking example of a major problem that besets all of the digital ecosystem contenders.
• To generate value to its full potential, a Digital Life offering needs to have all the services integrated and aware of one another.
• This way the services work better and the owner of the services can gain a much deeper profile of the user.
• This is critical to selling value added advertising as well as providing a deeper and richer service to the user.
• So far only Google has come close to this ideal and this is a major reason why I believe it is by far the most successful at monetising the mobile internet opportunity.
• Yahoo!, Microsoft, Apple, Amazon, Twitter, Facebook, Sony, Tencent, Baidu, Alibaba and so on must all get on top this issue if they are to really succeed.
• Almost all the deals struck to date state that the acquired service or app. will continue to operate independently of the acquiring company.
• I believe independence is the only way in which acquiring companies can entice hot new services and apps to allow themselves to be purchased.
• Many acquirers believe that once the acquisition is closed, the problems are over but I suspect that the reverse is true.
• The acquirer has a fiduciary duty to its owners to earn a decent return on the money it invests and without integration, this is very unlikely to happen.
• Only a very few of the ecosystem players understand this problem and Facebook is not among them.
• Consequently I see Facebook’s attempts at expanding outside of social networking remaining stillborn and continue to believe that it will run out of growth as soon as the social networking piece is properly monetised on mobile devices.