Facebook – Star signs

Reply to this post

The stars are aligning for something special in the long-term.

• Facebook has announced that Instagram has passed 400m users in the latest of what has become a series of events that show that Facebook is edging towards becoming a fully-fledged ecosystem.
• Instagram has passed 400m users just 9 months after passing 300m and over 75% of the user base is now outside of USA.
• This comes hot on the heels of WhatsApp passing 900m users, the launch of Facebook M (see here), a move towards gaming and Facebook becoming a giant in video.
• When I put all of this together, I see the beginnings of a real move towards becoming a proper ecosystem rather than a single service and having a much wider appeal in users’ digital lives.
• This is actually Facebook’s second attempt at this, the first of which was the disastrous Facebook Home.
• Facebook Home was a user experience that took over the home screen of an Android device putting Facebook’s services front and centre.
• Unfortunately, the user experience was not very good and it was very difficult for users to access other things on the device.
• The result was that it was vilified by users and quickly discontinued.
• In contrast to this walled garden approach, Facebook’s second attempt at the ecosystem is all about enticing users to spend more time with Facebook.
• Facebook is approaching much of this through extending the Messenger client very much like LINE and KakaoTalk but I think that if they begin to get traction, they be broken out into specific Digital Life apps.
• Following this to its natural conclusion, Facebook could, in a few years’ time, have 79% coverage of the Digital Life pie.
• This would put Facebook comfortably in first position compared to its ecosystem competitors.
• RFM research indicates (see here) that Facebook still has an awful lot of work to do both on its Digital Life services and on the quality with which it delivers the ecosystem to its users.
• This combined with its 1.4bn users would put it in a position to earn far more than the $14.6bn in revenues that the market expects it to generate this year.
• This makes Facebook a company with the potential for substantial long-term upside but I think that we are still a long way away from this becoming a reality.
• Consequently, I am keeping a close watch to ensure that developments continue in the right direction and I am also waiting for a big short-term correction to maximise the long term potential.
• For the moment Microsoft remains at the top of my list.