|By Esmeralda Swartz||
|July 7, 2014 07:45 AM EDT||
When Facebook decided to invest a cool $19 billion ($16 billion upfront) for messaging app WhatsApp the entire world was bound to take notice. Telecommunications types, in particular, were keen to understand how this latest move would impact them as mobile operators have been feeling the heat from over the top (OTT) players like Google and Facebook for years. (To put this $19 billion in perspective, AT&T, one of the world's largest telecom carriers, invests about $20 billion in networks and spectrum in an entire year.) Shortly thereafter, in another surprise move and with the dust not quite settled on WhatsApp, Facebook picked up virtual reality startup Oculus Rift for $2 billion. This left many in the industry wondering what exactly was going on. While WhatsApp and Facebook's previous acquisition of Instagram for $1 billion were in keeping with its social network roots, Oculus Rift was in the video game industry and had yet to release a product. This led many to ask: What was Zuckerberg thinking? But if you dig deeper, these acquisitions are intertwined and central to Facebook's short and long term play to develop the next-generation communications platform. With WhatsApp and Oculus Rift, Facebook takes on Google and mobile providers in the race to do just that.
Let's start with WhatsApp. Messaging is one of the top activities on smartphones and these apps are increasingly viewed as social networks. WhatsApp is already an international phenomenon, even if it has not made as much of a statement in the U.S. just yet. In some markets, WhatsApp generates almost as much messaging traffic as all traditional carriers combined. Instead of people using carrier text and voice messaging at cents per message, WhatsApp users consume a few bytes of their data plan for close to zero, and send WhatsApp $1 a year. That's correct: WhatsApp charges nothing for the first year of service and then a mere $1 per user per year. That's not much to a phone company, but nice work for an app company getting close to half a billion users. This leads phone companies to pine after all that revenue they're losing. As if that's not enough, WhatsApp will add a voice calling service to its offering. With this capability, WhatsApp Facebook challenges telcos not only on mobile messaging but also for their bread and butter business: phone calls.
Facebook's entire history is all about getting more and more people to sign up and WhatsApp currently boasts more than 450 million active monthly users. The rapid rise of WhatsApp's user-base was largely due to the low cost and its commitment to not collect user data for advertising revenue, despite users providing detailed personal information to the company, including private texts to friends. If these qualities remain intact, the combined user base of both networks will be truly massive.
Zuckerberg assured the world that acquiring WhatsApp was not simply about money, but rather that it was in tune with his vision that everyone in the world should be connected. He has also stated that mobile operators should give away Internet access in developing nations. Who is going to argue against the idea that communications (in the broadest sense) has delivered social and economic benefits to people in affluent countries? If we expand opportunities to communicate by providing cheap and effective tools, then people and economies benefit, and that's a good thing. However, with free Internet access and almost free WhatsApp voice calling, Facebook can offer nearly what carriers can offer and all those customers will in reality have more disposable income to pay bigger subscriptions and respond to ads. This will mean Facebook gets richer, even as Zuckerberg implied that this would be a happy coincidence, and not the fundamental reason for the acquisition. But it's important to remember that mobile operators stand between Facebook and its customers and rallying public opinion behind a noble cause is good for Facebook and makes the carriers look greedy for not supporting the cause.
WhatsApp is obviously an important element of Facebook's strategy and the company is committed to honoring the app's principles: cheap, reliable, easy to use, no ads and preserves privacy. Just like Google, Facebook is increasingly faced with the harsh reality that many people simply don't like or trust its platform. Buying companies like WhatsApp and Oculus Rift and giving them the freedom to stick to their core roots is an important component to growing the all-important subscriber base and restoring the value and "cool" factor of Facebook long term. Rather than trying to integrate acquisitions into the mother ship, Facebook and Google (e.g., Nest acquisition) are taking a similar approach by putting their significant marketing and development resources behind the acquired companies while letting them continue to innovate autonomously.
The autonomous component is a key strategy. Facebook's internal innovations within its original social networking platform (Facebook Platform and Facebook Messenger for PCs) have not been successful. So, just like corporate giants in other industries, Facebook needed fresh infusion from the outside. For example, while Snapchat and Pinterest have been innovating in social media, Facebook bought its way in with the Instagram purchase in 2012. Facebook's "me too," Snapchat look alike app called Poke - an internal endeavor - again didn't make it off the ground. And it's not just Facebook. Google's list of abandoned projects has its own Wikipedia page that is worth a read. However, when you compare these two companies' success rates in innovation to other big companies (e.g. AT&T, GE, Ford, Nokia) they all have lists of failures alongside their successes that keep them in business. We expect Google and Facebook to be different because they are still relatively new, but now they are big and like any large corporation are just as prone to messing up big projects. Following in the path of corporate giants that came before them, buying innovative small companies is critical to their long-term strategy and relevance.
When it comes to these companies' actual wins, some might argue, for example that the Android OS and Google Web Services are only successful because they have been given way to boost Google's real business - Google search and Web ads - which are still responsible for the bulk of Google's revenue. This is a similar theme for Facebook. Both companies are riding the Web advertising wave, but now to stay on top in that field they need to remain the go-to players for the next-generation communications/advertising platform: augmented reality provided by Google Glass and Virtual Reality provided by Oculus Rift (Facebook). However it is important to note that advertising revenue has become, for these companies, not the primary goal, but rather a means to an end. Google's actions suggest that the company has a bigger picture in mind, and Zuckerberg wants to build a lasting place in history for himself and Facebook. Both companies are entering these new modified-reality markets to ensure they have a growing subscriber base and their advertising revenue is protected well into the future to give them the funds they need to do what they want in their endeavors. But that's where the similarities come to a grinding halt.
I'll get into the differences in my next blog. Follow us on Twitter to make sure you don't miss it.
SYS-CON Events announced today that Cisco, the worldwide leader in IT that transforms how people connect, communicate and collaborate, has been named “Gold Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Cisco makes amazing things happen by connecting the unconnected. Cisco has shaped the future of the Internet by becoming the worldwide leader in transforming how people connect, communicate and collaborat...
Mar. 26, 2015 07:00 PM EDT Reads: 4,993
15th Cloud Expo, which took place Nov. 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA, expanded the conference content of @ThingsExpo, Big Data Expo, and DevOps Summit to include two developer events. IBM held a Bluemix Developer Playground on November 5 and ElasticBox held a Hackathon on November 6. Both events took place on the expo floor. The Bluemix Developer Playground, for developers of all levels, highlighted the ease of use of Bluemix, its services and functionalit...
Mar. 26, 2015 06:30 PM EDT Reads: 4,587
The list of ‘new paradigm’ technologies that now surrounds us appears to be at an all time high. From cloud computing and Big Data analytics to Bring Your Own Device (BYOD) and the Internet of Things (IoT), today we have to deal with what the industry likes to call ‘paradigm shifts’ at every level of IT. This is disruption; of course, we understand that – change is almost always disruptive.
Mar. 26, 2015 05:15 PM EDT Reads: 792
Docker is an excellent platform for organizations interested in running microservices. It offers portability and consistency between development and production environments, quick provisioning times, and a simple way to isolate services. In his session at DevOps Summit at 16th Cloud Expo, Shannon Williams, co-founder of Rancher Labs, will walk through these and other benefits of using Docker to run microservices, and provide an overview of RancherOS, a minimalist distribution of Linux designed...
Mar. 26, 2015 04:15 PM EDT Reads: 2,274
SYS-CON Events announced today that Alert Logic, the leading provider of Security-as-a-Service solutions for the cloud, has been named “Bronze Sponsor” of SYS-CON's 16th International Cloud Expo® and DevOps Summit 2015 New York, which will take place June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo® and DevOps Summit 2015 Silicon Valley, which will take place November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA.
Mar. 26, 2015 04:00 PM EDT Reads: 1,446
Businesses are looking to empower employees and departments to do more, go faster, and streamline their processes. For all workers – but mobile workers especially – utilizing the cloud to reconnect documents and improve processes without destructing existing workflows can have a dramatic impact on productivity. In his session at 16th Cloud Expo, Mark Grilli, vice president of Acrobat Solutions marketing at Adobe Systems Incorporated, will outline new ways that the cloud is changing the way peo...
Mar. 26, 2015 04:00 PM EDT Reads: 1,053
SYS-CON Events announced today that Aria Systems, the leading innovator in recurring revenue, has been named “Bronze Sponsor” of SYS-CON's @ThingsExpo, which will take place on June 9–11, 2015, at the Javits Center in New York, NY. Proven by the world’s most demanding enterprises, including AAA NCNU, Constant Contact, Falck, Hootsuite, Pitney Bowes, Telekom Denmark, and VMware, Aria helps enterprises grow their recurring revenue businesses. With Aria’s end-to-end active monetization platform, g...
Mar. 26, 2015 04:00 PM EDT Reads: 1,440
SYS-CON Events announced today that Vitria Technology, Inc. will exhibit at SYS-CON’s @ThingsExpo, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. Vitria will showcase the company’s new IoT Analytics Platform through live demonstrations at booth #330. Vitria’s IoT Analytics Platform, fully integrated and powered by an operational intelligence engine, enables customers to rapidly build and operationalize advanced analytics to deliver timely business outcomes ...
Mar. 26, 2015 03:30 PM EDT Reads: 2,031
Are your applications getting in the way of your business strategy? It’s time to rethink your IT approach. In his session at 16th Cloud Expo, Madhukar Kumar, Vice President, Product Management at Liaison Technologies, will discuss a new data-centric approach to IT that allows your data, not applications, to inform business strategy. By moving away from an application-centric IT model where data integration and analysis are subservient to the constraints of applications, your organization will b...
Mar. 26, 2015 03:15 PM EDT Reads: 2,420
SYS-CON Events announced today that QTS Realty Trust, one of the nation’s largest and fastest-growing providers of data center facilities and cloud services and a leader in security and compliance, will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY. QTS Realty Trust, Inc. (NYSE: QTS) is a leading national provider of data center solutions and fully managed services, and a leader in security and compliance...
Mar. 26, 2015 03:00 PM EDT Reads: 1,025
SYS-CON Events announced today that Solgenia will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Solgenia is the global market leader in Cloud Collaboration and Cloud Infrastructure software solutions. Designed to “Bridge the Gap” between Personal and Professional S...
Mar. 26, 2015 03:00 PM EDT Reads: 2,512
SYS-CON Events announced today that Liaison Technologies, a leading provider of data management and integration cloud services and solutions, has been named "Silver Sponsor" of SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York, NY. Liaison Technologies is a recognized market leader in providing cloud-enabled data integration and data management solutions to break down complex information barriers, enabling enterprises to make sm...
Mar. 26, 2015 03:00 PM EDT Reads: 3,295
SYS-CON Events announced today that Akana, formerly SOA Software, has been named “Bronze Sponsor” of SYS-CON's 16th International Cloud Expo® New York, which will take place June 9-11, 2015, at the Javits Center in New York City, NY. Akana’s comprehensive suite of API Management, API Security, Integrated SOA Governance, and Cloud Integration solutions helps businesses accelerate digital transformation by securely extending their reach across multiple channels – mobile, cloud and Internet of Thi...
Mar. 26, 2015 02:15 PM EDT Reads: 1,300
Cloud is not a commodity. And no matter what you call it, computing doesn’t come out of the sky. It comes from physical hardware inside brick and mortar facilities connected by hundreds of miles of networking cable. And no two clouds are built the same way. SoftLayer gives you the highest performing cloud infrastructure available. One platform that takes data centers around the world that are full of the widest range of cloud computing options, and then integrates and automates everything. J...
Mar. 26, 2015 02:00 PM EDT Reads: 1,463
SYS-CON Events announced today that CommVault has been named “Bronze Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. A singular vision – a belief in a better way to address current and future data management needs – guides CommVault in the development of Singular In...
Mar. 26, 2015 02:00 PM EDT Reads: 1,384
To manage complex web services with lots of calls to the cloud, many businesses have invested in Application Performance Management (APM) and Network Performance Management (NPM) tools. Together APM and NPM tools are essential aids in improving a business's infrastructure required to support an effective web experience... but they are missing a critical component - Internet visibility. Internet connectivity has always played a role in customer access to web presence, but in the past few years u...
Mar. 26, 2015 02:00 PM EDT Reads: 4,567
SYS-CON Media announced today that @ThingsExpo Blog launched with 7,788 original stories. @ThingsExpo Blog offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. @ThingsExpo Blog can be bookmarked. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago.
Mar. 26, 2015 01:45 PM EDT Reads: 2,106
In the midst of the widespread popularity and adoption of cloud computing, it seems like everything is being offered “as a Service” these days: Infrastructure? Check. Platform? You bet. Software? Absolutely. Toaster? It’s only a matter of time. With service providers positioning vastly differing offerings under a generic “cloud” umbrella, it’s all too easy to get confused about what’s actually being offered. In his session at 16th Cloud Expo, Kevin Hazard, Director of Digital Content for SoftL...
Mar. 26, 2015 01:00 PM EDT Reads: 1,248
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
Mar. 26, 2015 01:00 PM EDT Reads: 2,833
The Internet of Things promises to transform businesses (and lives), but navigating the business and technical path to success can be difficult to understand. In his session at @ThingsExpo, Sean Lorenz, Technical Product Manager for Xively at LogMeIn, demonstrated how to approach creating broadly successful connected customer solutions using real world business transformation studies including New England BioLabs and more.
Mar. 26, 2015 12:30 PM EDT Reads: 4,642