Instagram, WhatsApp, Portal… the Facebook giant is struggling to diversify

Dressed in his eternal blue t-shirt, Mark Zuckerberg made an appearance on the big screen last June at VivaTech, the Parisian high mass of startupers. His interviewer, publicist Maurice Lévy, was careful to avoid controversial themes – data protection, misinformation or accusations of monopoly. Single subject: Facebook innovations. But even on this ground, Zuckerberg did not seem to his advantage.

Unambitious, when he announces that he wants to pay more creators of videos on Facebook (up to 1 billion dollars per year, against 10 billion at YouTube). Embarrassed, when Maurice Lévy, teasingly, criticized his virtual reality helmets, “heavy, hard to put on” and giving “unnatural” sensations. Sheepish when, questioned about his ambitions in e-commerce, Zuckerberg had to admit it: “I don’t think we’re competing with Amazon at the moment.

Is the founder of Facebook in the best position today to talk about innovation? Since the creation of his social network in 2004, the former Harvard student has based his business on a unique model: the sale of its users’ data for advertising purposes. Supplemented over the years by Instagram and WhatsApp, his empire is no worse off, franchising this summer the bar of 1,000 billion dollars in market capitalization. But this success only rests on one leg. In the first quarter of 2021, the Menlo Park firm thus achieved 25,439 billion dollars in advertising turnover, against 732 million in the “other income” section – not even 3% of the activity.

However, this business model is threatened by the new, increasingly restrictive data protection measures for Internet users. The tech giant has in principle the means to launch new flourishing services with its dantesque audience, that is to say 3.45 billion humans using its services each month. However, its numerous attempts at diversification in recent years have struggled to convince. A spokesperson for Facebook France assumes with Capital: “We put our users at the center, offering them several new features a day, with a “test and learn” approach. We never arrive with a monetization objective: that part can take years.”

Zuckerberg had so far focused his attention on winning subscribers, notably through the acquisition of Instagram in 2012 or WhatsApp in 2014. Facebook certainly has a colossal and growing research budget of $18.447 billion spent in 2020. But these sums seem above all to be directed towards the recruitment of artificial intelligence engineers, capable of increasing the accuracy of advertising algorithms even more… As for the designers of Facebook applications, they do not hesitate to copy what works at Snapchat or TikTok Rivals, such as fleeting photos or short videos. “Facebook does not hide it, but its diversification outside social networks has led to many flops”, observes Julien Le Bot, author of the book “Inside the head of Mark Zuckerberg(Ed. Actes Sud).

Flops, the word is not an exaggeration for consumer services. The Californian giant has thus ventured into the dating market, with Facebook Dating. This copy of Tinder uses by default data such as age, education or profile photos of the user, and also indicates the friends he has in common with singles met. “We feared their arrival, Facebook is an unparalleled data machine, comments a manager of a competing application in France. But we do not say that they are overshadowing us for the moment. Launched last October, the service had convinced only 39,000 subscribers in the Paris region in mid-July, according to our statement. Not terrible in a basin of 12 million inhabitants.

The results are also disappointing for Marketplace, launched in the classifieds segment in 2017 in France. As for dating, Facebook does not yet offer a paid option, and does not communicate any figures. But the number of announcements remains modest. For example, on a search for the keyword “dumbbells” in Paris intramural last July, Capital found 29 ads on Facebook, against 204 on Leboncoin. Facebook has also made a big bet in video game streaming, allowing its subscribers to play and broadcast their game online and live. Inaugurated in 2018, Facebook Gaming visited to compete with Twitch, Amazon’s leading platform. But according to an analysis by Streamlabs, in the first quarter of 2021, Twitch accounted for 72.3% of total time watched, compared to 15.6% for YouTube and 12.1% for Facebook.

Success is also expected in its new business services. So Workplace. This collaborative space allowing to chat, share documents or organize visios between colleagues has certainly been boosted by the rise of teleworking, gaining 40% of subscriber companies in one year, with customers such as Danone, Celio or Century 21. But with 7 million salaried users, it remains far from the 145 million Teams, Microsoft’s solution… Zuckerberg’s priority track remains to convince companies to use its e-commerce solutions. Buttons have been added to Instagram, allowing you to click on a link under an image presenting a bag or a piece of jewelery to buy it. “But this channel doesn’t trigger a lot of sales,” notes Etienne Adou, co-founder of Heyday, a social commerce specialist.

Facebook is now inviting businesses to use its Messenger and WhatsApp apps to interact with customers. Conversational robots answer their questions, even suggest products to buy. But these chatbots are designed by companies outside Facebook, such as Heyday, which has sold its solution to Decathlon in six countries: “For purchases, we redirect WhatsApp customers to the e-merchant’s site, because there are still a reluctance to pay by credit card in the app”, explains Steve Desjarlais, from Heyday. Zuckerberg’s ultimate goal is to offer a closed sales ecosystem, thus integrating a means of payment, Facebook Pay, which is still in the making. As for the creation of a Facebook currency, called Diem, attached to the course of the main world currencies (a “stable coin”), it remains postponed for the moment.

However, time is running out. “They have no choice, their ‘dirty little business’, targeted advertising, will be increasingly banned, and one day the party will be over,” said Julien Le Bot. Subscribers, even addicted to their social networks, are increasingly concerned about the protection of their personal data. Apple has decided to make their harvest more difficult in the latest version of its iPhone (iOS 14.5), requiring Facebook and others to apply the agreement of Internet users before tracing them online from site to site.

But non-personalized ads are 50% less profitable, Facebook said in an internal study. “Help us keep Facebook free,” the group implored in a message to iPhone owners to agree to share their data, a sign that their livelihood is in danger. Another pitfall: the GDPR (General European Data Protection Regulation), in the name authorized by the European Cnil (National Commission for Computing and Liberties) requests an investigation into the sharing of data between Facebook and WhatsApp, normally prohibited. In the United States, the authorities also monitor the risk of monopoly.

What if the future rested, for Facebook, on products rather than services? Its kind of connected tablet for making video calls, Portal, did not cause a stir, with 200,000 units sold in the United States in the first quarter of 2020 according to Strategy Analytics. This does not prevent Facebook from planning, probably for next year, a smart watch with two cameras. But the company is basing its hopes above all on the Oculus virtual reality headsets, acquired in 2012. The latest version, Oculus Quest 2, has been a great success.

So much the better for Mark Zuckerberg, who has great hopes for virtual reality. For him, Facebook must be the initiator of the next generation of the Internet, which he calls the “metaverse”. This 3D parallel universe will be accessible in particular via connected helmets and glasses, and will allow you to “teleport” to a work meeting, a fitness class or a store for shopping… Will Facebook one day be the one-stop shop of this science fiction world? Answer in ten years.

The book that splashes Zuckerberg


New York Times reporters Cecilia Kang and Sheera Frenkel interviewed 400 Facebook employees for their book “An ugly truth(untranslated). It sheds light on the strategy behind Mark Zuckerberg’s repeated “I’m sorry.” Despite the warnings, Facebook lets the crises play out and then downplays their consequences, apologizes and promises change. As for the Russian influence in the election of Donald Trump via advertising purchases, or the use of the network in “ethnic cleansing” in Burma.

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