The Facebook pivots to WeChat post

11 minutes estimated reading time

Wonks clearly saw parallels. Hence the short form ‘Facebook pivots to WeChat’. The first thing I’d advise you to do is read Mark Zuckerberg’s notes on how he is planning to move Facebook as a business. There’s a link at the bottom of this post to it, I’ll still be here when you come back.

Mark Zuckerberg f8 Keynote

The reactions were:

  • Facebook is trying to ‘kill’ Apple
  • Advertisers need to be concerned about Facebook’s moves
  • Facebook’s pivot is a diversion or play to get out from under future regulation
  • It’s fake, or variants of that
  • It’s about asserting market dominance
  • It’s a move against Snap
  • It’s a ‘China’ type move, trying to corner the free internet

These takes are mirrors of our own views and concerns as about Facebook. I am not a Facebook apologist, by any means. But I could see a clear parallel between Facebook and concerns about television, the communist threat or big oil. And to a large extent Facebook is highly deserving of our skepticism.

So let’s start breaking them off one by one:

Facebook is trying to ‘kill’ Apple

Apple has managed to differentiate from Google and other web giants by its privacy focus. This is because advertising isn’t that important to Apple’s business model. Where Apple have tried advertising, they haven’t been that successful at it.

Facebook’s messaging focus ‘doing a WeChat’ has caused others to draw clear parallels with China. In particular, Apple’s problems in China and WeChat. The simple answer is that its complicated:

  • Apple’s problems in China aren’t just about WeChat. WeChat creates a level playing field between Chinese Android-based and iOS user experience. Because consumers spend so much time inside the application, rather than the OS
  • Both Apple and Chinese manufacturers lose services revenue to WeChat. On a per device basis, this particularly penalises manufacturers like Xiaomi who break even on the handset at best
  • Apple has tested the price elasticity of the premium phone market in China (and elsewhere). Channel discounting has been shown to drive a massive uptake in sales

Facebook’s messaging strategy poses a challenge to mobile operators, Google’s Android messaging offering and Apple Messages equally.

Mobile phone operators saw messaging traffic drop precipitously over the past decade. China Mobile were one of the first operators of video and SMS over the internet with its Fetion texting service. This was shut down three years ago in the face competition from Youku, QQ Video and WeChat.

The GSM Association has tried to fight back against the decline in SMS and MMS messaging with Rich Communications Services (RCS). It is supported on Android Messages app and Google has looked as wider implementation.

RCS is currently supported by 11 smartphone manufacturers and 55 mobile network operators across Asia, the Americas, Africa and Europe. Facebook may support it, but is likely to compete against it. Apple hasn’t announced support for RCS (yet).

Here’s what Mark said, nothing particularly controversial but a nice analysis of current development options.

You can already send and receive SMS texts through Messenger on Android today, and we’d like to extend this further in the future, perhaps including the new telecom RCS standard. However, there are several issues we’ll need to work through before this will be possible. First, Apple doesn’t allow apps to interoperate with SMS on their devices, so we’d only be able to do this on Android. Second, we’d need to make sure interoperability doesn’t compromise the expectation of encryption that people already have using WhatsApp. Finally, it would create safety and spam vulnerabilities in an encrypted system to let people send messages from unknown apps where our safety and security systems couldn’t see the patterns of activity.

A privacy-focused vision for social networking – Mark Zuckerberg March 6, 2019

What its most likely to do is strip value added services away from carriers, Google and Apple; rather than Apple on it’s own. Encryption alone doesn’t mean security or privacy; but Apple needs to provide that level of nuance to premium consumers. Given the Google Android services there is still blue water between the eco-systems.

Advertisers need to be concerned about Facebook’s moves

Advertisers on Facebook always need to be concerned about Facebook’s moves. The people with most to worry are people who build their businesses on Facebook’s platform. But that isn’t a new issue, its been a mistake that marketers have made over-and-over again in the digital realm. And they’ll still keep making the mistake.

In many respects, Facebook advertising has had to change. The reason why Facebook has been putting out features like stories and carousels is because of ‘context collapse‘. Back in 2015, the Information wrote about how Facebook users were sharing less. Sharing less means less room for ad inventory in the news feed and less reasons for the audience to remain engaged with the newsfeed.

However, Facebook won’t fully give up on the town hall type environment that the news feed provides to advertisers, don’t take Mark’s word for it: follow the money.

Public social networks will continue to be very important in people’s lives — for connecting with everyone you know, discovering new people, ideas and content, and giving people a voice more broadly. People find these valuable every day, and there are still a lot of useful services to build on top of them. But now, with all the ways people also want to interact privately, there’s also an opportunity to build a simpler platform that’s focused on privacy first.

A privacy-focused vision for social networking – Mark Zuckerberg March 6, 2019

Zuckerberg needed to do something to combat context collapse, even if the regulatory environment hadn’t got a lot worse for him. It also means the declining amount of information available to advertisers will continue to go that way.

On the plus side if you look at WeChat, you can see the kind of directions Facebook is likely to take:

  • Advertising / promoted content
  • On-platform services and retail
  • E-commerce
  • Mini-applications
  • Payments
  • Ticketing
  • Electronic real ID

And the one thing that we can be sure about with Mark Zuckerberg is that he doesn’t like leaving money at the table. Expect change, (continue) to be concerned about advertising efficiency and effectiveness, but don’t worry about not having Facebook as a channel in the future.

Facebook’s pivot is a diversion or play to get out from under future regulation

There are a few angles to this which I am going to break down into two parts:

Facebook’s interest

  • The more entrenched across services, the harder Facebook will be to take action against. Facebook would be harder to break apart in any future anti-trust court decision
  • The move towards messaging could reduce the issues that Facebook faces in terms of moderating speech and preventing bad behaviour 
  • Pushes Facebook’s PR / repetitional issues under the rug

Consumer interest

  • From a consumer interest point of view Facebook is showing a willingness to go beyond encryption by carefully choosing where its data centres go for maximum regulatory protection. (Though one would still fall under the extra-territorial laws of the five Is countries in particular the US, UK and Australia at the moment)
  • Consumer convenience due to focus on interoperability, so one might not need to have both WhatsApp and Facebook Messenger on a device – in theory at least

It’s fake, or variants of that

We won’t know the true level of sincerity and commitment of Facebook to make a positive impact through this pivot. Facebook’s brand is so low, it is very easy to believe the very worst in them. I can’t say that I am surprised this came out in the commentary but I am prepared to hold fire on judgement just yet.

It’s about asserting market dominance

Some commentators saw a clear link between Facebook’s pivot and Microsoft’s push into web browsers. Both companies were threatened by disruption and utilised their existing market dominance in their markets in current products to extend their dominance into future eras. Businesses by their very nature try to maintain and grow themselves. It would be a natural outcome of Facebook’s pivot.

Microsoft’s move eventually led to the Judge Jackson ruling against Microsoft. Something that Facebook would be very keen to avoid.

Part of the reason why Facebook bought WhatsApp originally was partly put down to Mark Zuckerberg’s concern about only having one great idea. He wanted to bulk up the Facebook brain trust with WhatsApp’s management. We know that didn’t end well with the management team eventually departing. This pivot could be seen as an antidote to Zuckerberg’s creative bankruptcy.

It’s a move against Snap

The competition posed to one-to-one messaging was perceived by analyst Richard Greenfield of BTIG as a threat to Snap. Facebook is very competitive, but Facebook has bigger markets to focus on with this move. Effects on Snap would be a welcome bonus rather than a key focus. Snap has bigger issues at the moment:

  • User growth is moribund. Instagram has already ‘outsnapped’ Snap with its fast follower copying of Snap’s features
  • Snap needs to do better in generating advertising revenue

In essence it’s like sleeping with a hippo. It could roll over and crush you without even realising what it managed to do in its sleep. Its a move that is likely to adversely affect Snap, but its by no means all about Snap.

It’s a China type move trying to corner the free internet

This particular trope came from Fox Business. What’s interesting is that one would expect the outlet to be pro-free markets. The commentary by Kurt Knutsson talks about the inescapability of Facebook and conflates the similarities with WeChat to argue Facebook is sinister in a similar manner to ‘China’. The thing I took away from it is the cross-party skepticism on Facebook, privacy and market power.

If you would have told me a decade ago that a right wing business publication would have been concerned about free markets and market dominance I wouldn’t have believed you.

Facebook’s assumptions

Facebook’s pivot requires some major changes in the companies technical ability:

  • Currently Facebook Messenger and WhatsApp use encryption from the Open Whisper Systems project that gave us Signal Messenger. Signal is an open source product funded by donations to the Signal Foundation. It isn’t a core strength of Facebook
  • A lot of WeChat’s secret sauce is how they managed to build so much functionality into its mobile app without taking away from the user experience. This is in sharp contrast to the plethora of apps currently used for Facebook. It poses a major UX design challenge for Facebook
  • Facebook can expand to new areas successfully such as payments – again not an area where Facebook has previously known to be successful

There is an assumption that Facebook’s communications team can give it enough space to allow the pivot to be put in place. Facebook’s management team won’t drop the ball between now and the pivot.

More information

A privacy-focused vision for social networking by Mark Zuckerberg – shared on his facebook page.

Facebook’s pivot must be viewed with scepticism | Financial Times

Facebook’s former chief of security says its privacy pivot is ‘punting’ on its hardest issues | The Verge

Facebook’s Biggest Bull Sees Privacy Pivot as Move Against Snap | Bloomberg

Facebook’s Awkward Pivot to Privacy | Slate

Facebook’s pivot is bigger than privacy | Axios

Facebook’s Fake Pivot To Privacy | Forbes – As a social network, Facebook, has 15 million fewer users today than in 2017. During October – December of 2018, 23% of Facebook users in the U.S. showed signs of activity, e.g. updated their status or posted a comment, as compared to 32% at the same time in 2017. In 2016, Facebook accounted for more than half of time spent on social networks, but that figure is anticipated to be 44.6% in 2019, while, for the first time, from 2018 on, it was expected that Facebook usage among the 11-24 demographic – highly coveted by advertisers – would decline.

Facebook privacy pivot a China-type move, trying to corner the free world: Cyber Guy | Fox Business

Building your business in Mark’s house | renaissance chambara – on the perils of over-reliance on platforms.

Facebook and advertising or why Facebook is a dead man walking part III? | renaissance chambara

Why Facebook is a dead man walking part II? | renaissance chambara

Why Facebook is a dead man walking | renaissance chambara

Jargon Watch: context collapse | renaissance chambara