Analysis: Facebook’s strategy in 2020

A difficult passage to adulthood for the Dot-com giant

Facebook, Inc. is a poster child of the Silicon Valley. Created in a dorm room as a “Hot Or Not” copycat, the budding company quickly evolved into a pure play behemoth and is, with 70+ billion dollars revenue, one of the biggest technology companies in the world; alongside Apple, Amazon, Google and Microsoft. Facebook is now so much more than its original flagship service: the namesake company is also home to Instagram, WhatsApp, and Oculus!

Like most companies benefitting from a sudden, frenetic, unstoppable growth, the passage to adulthood comes with issues. Privacy concerns, muddled impact on politics and societal topics, Facebook is controversial since its inception. However, despite increasing government scrutiny around the world and a “Big Brother” image in the public eye, Facebook’s agenda remains extremely ambitious, as proven by its unrelentless desire to create the world’s digital currency and the rumored interest of Mark Zuckerberg in politics.

2020 has been a pivotal year towards the company grand goals – let’s look into it.

Embrace, Extend, and Extinguish

I generally dislike this expression because it makes company objectives look much more evil than they actually are, but it is somewhat suitable to explain Facebook’s latest strategic moves.

If you hear about “Embrace, Extend, and Extinguish” (or EEE) for the first time, know that it comes from the United States v. Microsoft Corp. antitrust trial from 2001. This expression was used by a VP of Intel who described Microsoft’s strategy to “kill HTML by extending it” during the trial. Microsoft is now a leading company in open source development, but, admittedly, the EEE philosophy is pursued or at least considered by most technology giants in various ways, and can’t be tied exclusively to Facebook.

According to Wikipedia, the three phases of this strategy are:

• Embrace: Development of software substantially compatible with a competing product, or implementing a public standard.
• Extend: Addition and promotion of features not supported by the competing product or part of the standard, creating interoperability problems for customers who try to use the “simple” standard.
• Extinguish: When extensions become a de facto standard because of their dominant market share, they marginalize competitors that do not or cannot support the new extensions.

In the case of Facebook, various activities ranging from Messaging to Dating, can be seen through an EEE prism… and it’s precisely on these activities that Facebook made tremendous progress this year!

The Messaging War

As a consequence of COVID-19, there have been passionate discussions and expert presentations showcasing Zoom, Microsoft Teams, Slack, or even Google Meet and Skype as future-proof solutions to work collaboratively and do video conferencing. During Microsoft’s latest earnings call, Satya Nadella revealed that Microsoft Teams has now 115 million daily active users, up 50% from March 2020; a gold nugget for Microsoft 365 adoption, and a proof that this market is extremely promising.

The remote workers market is the new gold rush for the tech industry, but we shouldn’t forget about the more traditional Messaging market, which is a cornerstone of personal computing. Who owns personal messaging gets a strong entry door into individuals’ digital lives, and this market is utterly dominated by Facebook, whose strategic moves in 2020 are almost the final nail in its competitors’ coffin.

Let that sink in for a minute: out of the 7.5 billion people living on Earth, a cumulated 3.3 billion are using Facebook’s messaging apps (Messenger, WhatsApp) every month, according to a recent report from Statista. To put things into perspective and understand the magnitude of Facebook’s home run, know that:

• 6.5 billion people have access to electricity
• 4.8 billion people are mobile phone users (including smartphones)
• 4.66 billion people have access to Internet
• … 3.5 billion people own a smartphone

This is earth-shattering. In fact, apps like WhatsApp, and its 2 billion monthly users alone, have taken the lead, and with the ever-decreasing cost of Internet, combined to its ever-growing availability, personal messaging apps have proven themselves to be a cheaper yet superior (in most cases) alternative to operator-based messaging via SMS/MMS.

The competition landscape is an arid desert, with two non-globally ubiquitous exceptions: We Chat (1.2 billion users, mostly in China) and Apple iMessage (< 1 billion users, limited to the Apple ecosystem which itself is only semi-dominant in the USA). Of these two competitors, We Chat’s creator Tencent is the true sole last man standing, considering that a high proportion of iMessage users also use (most of the time primarily) Messenger or WhatsApp. Meanwhile, Google has notoriously failed countless times at making a dent into the market.

So, how is Facebook trying to strengthen its position as the world’s personal messenger in 2020? By embracing and extending.The Menlo Park based firm made several moves to consolidate its messaging properties, “reinvent” concepts first introduced by TikTok or Snapchat, and provide irresistible solutions for consumers, in light of its market power and associated network effect.

Cross-platform messaging on Instagram and Messenger

In September 2020, the Californian company has taken a big step in integrating various messaging platforms by allowing select users on Instagram and Facebook Messenger to chat together. This is part of a plan, outlined by Mark Zuckerberg in 2019, to transition his social media empire from one based on public spaces to one with a greater emphasis on private communication, arguing that “private messaging, ephemeral stories, and small groups are by far the fastest growing areas of online communication”.

According to Facebook, “the feature is currently being tested in select markets and will expand globally in the coming months.”

This integration of messaging platforms won’t be limited to Instagram and Messenger: WhatsApp will be next. Combining end-to-end encrypted WhatsApp with Instagram and Messenger could prove to be a huge infrastructure challenge, but surely the bigger obstacle will come from regulators, who are wary of the company dominance in messaging.

Aiming for UX parity

Facebook Messenger overhauled its logo and added new features that make it feel like more Instagramy. The iconic Messenger logo ditched its solid blue for a blue-to-pink gradient, and Selfie stickers are introduced, both changes “reflect a shift to the future of messaging, a more dynamic, fun, and integrated way to stay connected to the people you’re close to” according to Messenger VP Stan Chudnovsky.

In the meantime, many features have been introduced to help Instagram catch up on Messenger; eg. reply to a specific message, custom emoji reactions, forwarding to other friends or groups, etc.

To strengthen the network effect, a feature such as “Watch Together” allows to blur the lines between apps and create a homogenized experience: “Enjoy watching videos on Facebook Watch, IGTV, Reels (coming soon!), TV shows, movies, and more with friends and family during a video call.”

Adopting competitors innovation

The most touted new feature introduced to both Messenger and Instagram is the Vanish Mode, which is clearly inspired by Snapchat: “Choose a mode where seen messages disappear after they’re seen or when you close the chat.”

Interestingly, but not surprisingly, a very similar feature was introduced recently to… WhatsApp. You see where we’re going there. And should I mention that other recent features such as Reels are clearly going into TikTok territory?

Messaging is not Facebook’s sole objective

A similar EEE strategy is pursued by the company on various markets where some of its assets, such as its ubiquity, its algorithm, or its technology, could prove to be tremendous advantages. Let’s mention some of these market incursions, either new or accelerated in 2020:

• Video: Facebook Watch is now 1.25 billion monthly users strong, compared to 720 million a year prior. Several innovations, including Reels and Watch Together, were introduced to Facebook’s arsenal this year. On this market, Facebook is going against YouTube (Google), Twitch (Amazon), or TikTok.
• News: confronted to the similar issues that plague Twitter, the company pledges on actively fighting fake news. To do so, Facebook multiply partnerships around the world with local, respected, news publishers. By ramping up its news offering, Facebook goes against Google News and Microsoft News, but also… news publishers themselves.
• Internal Community: Facebook’s Workplace is a direct competitor to Microsoft’s Yammer, which aims to leverage Facebook flagship service strengths to build communities within companies. The competition on this market will be fascinating, especially considering that Linkedin, another Microsoft property, is the equivalent of Facebook for professional networking.
• Cloud Gaming: building upon its classic Flash-turned-HTML5 game catalog, its more recent game streaming video service (Facebook Gaming), and its experience creating and publishing games with Oculus, Facebook is a refreshing new entry in the business of cloud gaming, directly competing with Google (Stadia), Microsoft (xCloud), or Amazon (Luna).
• Dating: Facebook finally expanded to dating, with the launch of Facebook Dating, a direct competitor to Tinder, directly embedded into the main Facebook app.

Facebook’s story is just beginning, and while a few dark clouds are accumulating over Menlo Park it is clear that, in the foreseeable future, the company will have an even bigger impact on our lives, and as a consequence will remain a key partner for companies wanting to engage with their consumers. Is it good or bad? I’ll let you be the judge on this one.

Stay tuned for more analysis in the future,

Antoine