Facebook as a social network has grown by leaps and bounds over the last five years. However, only being a public social network is not going to cut it and attract advertisers as there is a constant fight for the % share of someone’s time in a day which these internet companies with freemium business model are after, eyeballs and engagement. The trends are shifting and shifting very fast and we know where, towards mobile. The three mobile Ms – Mobile messaging, media and m-commerce are the top use-cases in life of a mobile user alongside gaming. And, Facebook needs to transform from a social network to a full-blown platform and these use-cases (& services) will be very important for Facebook to become one.
Facebook’s US$19 Billion acquisition of Whatsapp depicts how badly Facebook needed to play in this space to actually “buy the engagement time” or slice of almost 450+ million users’ daily life. Whatsapp is on the verge of a much swifter growth in terms of number of active users on its platform i.e. how much a user (today) spends his/her time on mobile and engaging with this private social network rather than public social network such as Facebook.
The overall interaction done on Whatsapp will help Facebook fill in the nodes of a user’s Social Graph rather than directly generating advertising revenues for Facebook. But Whatsapp’s acquisition creates a strong foundation for Facebook to integrate its standalone Facebook Messenger, Chat heads and Facebook Login into Whatsapp and expand it to much more with integration of m-commerce, media
Whatsapp offers a whole new opportunity for Facebook to transform it into a m-commerce platform. WeChat is one example of this. Chinese consumers can pay to buy almost anything on WeChat from Cookies to Coffee to taxi fare to even smartphones. For this Facebook will need to invest in a mobile payments solution.
While media is a broader term, we would include images, videos, gaming and music into this category.
- Facebook acquired Instagram last year for US$1 billion to take care of the imaging piece of this category plus it has its own social network which also see huge uploads and sharing. The another piece is video.
- Video service is a tricky asset to have as either it could be partnering with movie industry (e.g. NetFlix model) or having a platform for user generated content (e.g. YouTube) which it doesn’t have to worry about much at this stage but acquiring likes of DailyMotion or others could beef up Facebook’s platform and it already leverages YouTube’s openness for sharing of video within the platform.
- Facebook stepped up its gaming initiatives as soon as it ended its deal with Zynga to be the sole developer of social games ended almost 15 months ago. Fast forward seven months after the revamped deal, Facebook kickstarted a gaming apps ecosystem on its platform attracting gaming publishers to publish games on its social platform. Another good way to maintain engagement once the user logs into the Facebook. However, Facebook needs to take social gaming to mobile in a bigger way.
- We see music also as the key component which like video could be tricky (royalties to labels and artists) but is more personalized and can shape the user’s social graph, predict attitude and behavior quite well. While Pandora would be the best bet on paper for Facebook to go after next, considering its clever algorithms as it learns about a user everytime he/she login and listens to a song. But we think Spotfiy is the best bet in reality considering the strong synergies and partnerships with Facebook. Spotify is more social music platform than Pandora and already had greater integration with Facebook right from its inception. Spotify also acquired EchoNest this month which is the top music personalization and discovery API in the industry to compete well with likes of Pandora and increases its value further. As of end of 2013, Spotify had 26 million users and 6 million paying subscribers with presence in more than 60 countries globally.
Acquiring companies such as Spotify could fill an important gap for Facebook to become an independent and much more powerful platform (e.g. Android) with a complete bouquet of services to take it to the next level or by building its social graph and maybe into a powerful social search engine and attract marketers, brands and advertisers.