Facebook weakness

enforced WhatsApp aqusition

There are a lot of articles around Facebook’s WhatsApp aqusition. Two main categories:

1. WhatsApp is a cool company, developing lean code and is an efficient company which made Telcos loose 38BN USD in SMS Revenue.
2. Facebook has over induldged and yet aqcuired a fierece competitor.

I do appreciate the learnings around WhatsApp, but I don’t understand why anyone thinks, both have been a competitors nor why Facebook over spend.

The strategic situation of Facebook is a weakness in multiple dimensions:

1. Facebook could not deliver on messenging! It has tried a couple of times, but in general neither “the email replacement” idea has worked and neither has the “mobile messingeng” portion. In effect, I would argue that Facebook’s lack of success has enabled LINE (larger than WhatsApp, but mainly in Asia and the US) and WhatsApp to growth and create a business model forthemselves — neither the functionality nor the business model are compliant with FBs
2. This actually implies that Facebook is a one trick poney. Unlike Google, who has the ability to hire high quality developers and create completely new products in a very short time frame, Facebook does not have this ability. I can’t recall a complete new and successful feature Facebook has launched over the last few years, which also advances their business model.

The One Trick Pony is the most worring for shareholders. Facebook didn’t manage to compete with WhatsApp, Twitter, LinkedIn, LINE, WeChat and even PayPal — not for lack of trying.

This means its developers are focused on maturing the core Facebook business model and it needs the cash it made through the IPO and portfolio optimization to aqcuire new capabilities, to remain competitive and in the center of the customers world.

Facebook loosing the center stage of the customer, would kill the business model altogether, as it would mean less users and less ad revenue — less overall revenue and declining stock price, declining cash, etc.

From that “center of the users universe” business model perspective, the WhatsApp aqcuisition was “chump change”. It also shows that the decision makers at Facebook understand both it’s own limitations, strategy, and how to address it. Unlike a Google who tries everything a bit, a Yahoo! who becomes a new age AP or Reuters, Facebook’s management has a strategy and executes upon it relentlessly — there could have been a McKinsey consultant there! We definitely have to say bravo for strategy and execution — not for loosing it’s touch on delivery capability though.

Bravo! for strategy and execution.

So all is good and we are moving on, now?

No! The core facebook business model will wear out — they always are. Companies who can evolve their business model and act decisively, are generating sustainable success! These companies are rare though.

I have worked with General Electric, Accenture, Cisco Systems and all of these managed this trick and remaind over the decades successful. For exmaple Cisco, also an acquisition engine like GE, are proving this point.

WhatsApp has said, that they have been told a limited or no change for customers. This sounds like diluting business value.

Commentaries can be easily written and time will tell the story of Facebook.