Tag Archives: Facebook

Facebook: Rise of the Social Conglomerate

I’m reasonably certain that by now most of the people likely to read this blog are aware that Facebook has bought WhatsApp for around $19bn. That amount of money is eye-watering and there will be plenty written about it, but none of it will be better than this from analyst Benedict Evans, and I’m certainly not going to attempt to improve on it! Instead this blog will look at an interesting phenomenon that Ben touches on – the rise of tech conglomerates.

M&A tech-style

Mergers and Acquisitions are nothing new in tech of course – some companies like Cisco have built themselves incrementally based on a constant stream of acquisitions. Others do in more infrequently but with a degree of fanfare – the doomed AOL/Time Warner merger at the height of the Dotcom Bubble in 2000 is a classic for a range of reasons, from its sheer scale $160bn (in 2000!!) to its demise in the Bonfire of the Dotcoms that followed. We are also quite familiar with companies like Microsoft (Skype) and Google (Motorola, Nest) buying up companies to give them exposure to new markets – a time honoured business strategy. But there’s something different about Facebook’s approach to M&A, and it says a lot about the challenges they face.

Battle for the Home Screen

The ever-more crowded home screen
The ever-more crowded home screen

Facebook as we all know is a social network; but to be a successful social network your objective must be to be *the* social network. As a business then, Facebook’s success relies on exploiting network effects to build and maintain its dominance. As Evans points out and as we’ve increasingly come to realise, mobile users are increasingly taking a portfolio approach to their use of apps – Facebook for this, SnapChat for that, WhatsApp for messaging, Instagram for photos and other things – we find communities for specific purposes through our social networking apps, and these apps battle for dominance on the home screen of our phones.

Poor at Innovation, Too Late with the Chequebook

instagramFacebook has realised this as much as anyone and they’ve made numerous attempts to tackle the problem in-house – Poke, Home, Camera, Messenger, Paper – all have failed or underperformed (though the jury is out on Paper… for now). Compare this, for example, with Google who have been generally successful with in-house developments from Gmail to Maps to Google Drive. The failure of Facebooks apps and products are a pretty sad indictment of its ability to innovate beyond its core product. The reasons for this failure are varied by generally speaking I believe there’s two things at play: firstly Facebook haven’t matched their ubiquity with an ability to be first to market at scale – think about Google Maps by comparison; and secondly Facebook’s products couldn’t cope with the simplicity and focus of the specific competitors, think about the impact of Gmail by comparison. So more often than they’d like to, Facebook has been forced to reach for the chequebook, they’ve been forced to do it from a weakened negotiating position, and often facing criticism from the users of existing apps.

A Social Portfolio is Born

The consequence of this has been actually pretty interesting for business geeks like me. Rather than a series of products sitting under the Facebook brand, Facebook has been forced to maintain the new brands at arms’ length. Instagram and now WhatsApp retain a large degree of independence, with separate brands and separate management. Seemingly by accident and poor management, Facebook have struck upon a classic big business play – they have become a portfolio business. They have become Facebook Inc. – The Social Conglomerate.

 

Facebook Home: Clearly someone wasn’t thinking

Honestly, you can’t blame Facebook for thinking new Facebook Home is going to change the world… for them it probably seemed like an excellent idea (for them)… just think of all that wonderful data they could capture by being permanently on a user’s home screen… all… that… data. It’s the stuff Facebook drools itself to sleep about.

But there’s just one problem. What’s in it for the user? Facebook’s promotional materials say we’ll have a constant stream of our friends fab photos and posts… how cool is that?! But they clearly haven’t thought this through because Facebook Home dramatically fails the ‘real world’ test.

Continue reading Facebook Home: Clearly someone wasn’t thinking

Listen Facebook, just take my damn money!

When Facebook purchased Instagram last year part of the rationale was that Facebook was lousy with mobile and the acquisition would help. This was no frivolous thing, with mobile uptake and activity on Facebook outstripping browser-based action, and a majority of ad revenue coming from its browser-based activities Facebook could see writing on the wall.

Continue reading Listen Facebook, just take my damn money!

Quit whining, Instagram are a business

The response to the news that Instagram have changed their integration with Twitter has me puzzled… really puzzled. I’m not puzzled as to why Instagram chose to do so, as they see it, they want more control of the data and user experience for themselves. I’m also not puzzled that Twitter have done similar things in the past, for example to LinkedIn. No, what really puzzles me has been the response from the tech community… the community normally so enamoured with the idea of being an entrepreneur and making a truckload of cash (and possibly saving the world in the process).

Do tech companies (and people) misunderstand advertising?

Firstly, let me apologise for writing yet another post that mentions Facebook; I promise, this will not become a Facebook-focused blog. In my defence though, there’s an awful lot happening with it as a business and much of it is incredibly interesting for new age marketers – ie. app developers. So on that note…

There’s been a lot of ink (both real and virtual) expended in recent weeks analysing the current and future performance of Facebook, and putting aside its rollercoaster IPO, much of that ink has been devoted to the performance of Facebook in the advertising realm. A quick whip around the news sees stories about: declining revenues; inability to get mobile right; the loss of GM’s business just prior to the IPO; and of course comparisons with business like Google who did get their advertising model right prior to IPO. Most, if not all the analysis warns that Facebook hasn’t got their advertising model right and that with its weakness in mobile it’s falling further behind. Firstly, this is fairly obvious, but as the actions of GM show, some marketers, some commentators, and perhaps even Facebook itself, seem to have a misunderstanding about how advertisers can make best use of Facebook’s facilities – the key here is considering how users interact with Facebook.

Continue reading Do tech companies (and people) misunderstand advertising?

Facebook launches its app store

It’s definitely a fascinating development.

For app developers the opportunity to be hosted on a market designed to put the universe of apps out to 1/6 of the world’s population is simultaneously exhilarating and terrifying. Get it right and you stand to own the world, get it wrong and you’ll be buried by everyone else with the same thought – a needle in a haystack-sized pile of needles.