On Facebook’s New Focus on Private Messaging
How likely it is to happen, and what it would mean for its ad-based business models
On Wednesday, Mark Zuckerberg published a long blog post detailing the future he sees for Facebook, promising to “outline [the] vision and principles around building a privacy-focused messaging and social networking platform.” Naturally, this announcement stirred up quite a rumble among tech and media insiders, with various hot takes dissecting whether pivoting from public posting to private messaging is the right way to fix Facebook, what it would mean for Facebook’s business model, and just how serious Zuckerberg is to this new vision.
Underneath all the brouhaha is a growing sense of uncertainty about the future of social media and, for brand marketers, an anxiety-inducing series of changes that would be unleashed upon the digital advertising ecosystem should Facebook commit to its newfound mission of building a platform for private, ephemeral messaging. Many are left wondering if this is the right move for Facebook — if doing so signals Facebook’s move to finally take some responsibility for disrupting old media and step back from the media business, or if this is just another one of Zuckerberg’s many grand pronouncements that ultimately won’t materialize in any meaningful way.
A Necessary Pivot
There are two ways to look at Zuckerberg’s new mission statement: for one, the cynical folks tend to dismiss this as Facebook launching a marketing campaign to try to salvage their declining reputation; for others, this new focus on privacy is an encouraging sign that indicates Zuckerberg and the company finally have a concrete plan to fix some of the prevalent issues on Facebook, such as misinformation and intrusive data collection. Neither of these two views is correct by itself — there are reasons to be cynical about Facebook’s ulterior motives, but it’d be also wrong to completely dismiss it as a mere PR stunt that won’t result in changes to how Facebook operates in the future.
Make no mistake, Zuckerberg is looking out for his company’s best interests, as any competent CEO should (and must as a public company). And it so happens that it is in Facebook’s best interests to undergo a makeover. To say that Facebook’s media narrative of the past 10 months has been unflattering would be an understatement. Starting with the explosive Cambridge Analytica scandal, Facebook’s questionable practices around data collection and protection, as well as its ineffectiveness in curbing the spread of misinformation all become recurring headline topics, consistently putting the company under public scrutiny and severely damaged its brand.
Although its sinking reputation has yet to significantly affect its bottom line, (Facebook’s stock today remained roughly around the same price as when Cambridge Analytica scandal first broke), it is hard to deny that it has certainly affected how people are using Facebook. The latest data from Edison Research show Facebook lost an estimated 15 million users in the United States in 2018, with the biggest drop (down 5%) in the key 12- to 34-year-old demo. Even among those who are still using Facebook, the time they spend on Facebook proper is also sharply declining. A study from last August found average time per person spent browsing the site went down 6.7% year-over-year. If this trend continues — and there’s nothing suggesting that it won’t — then the value of Facebook’s core ad product, the News Feed, will inevitably be dragged down by it.
Granted, part of Facebook’s decline in time spent could be attributed to broader political fatigue exacerbated by an increasingly divided political climate, which is typically on full display on Facebook. Increasingly, people are realizing that their time spent on Facebook is not time well spent, hence less time browsing through their News Feeds and a retreat into smaller groups, private chats on Messenger, and pleasantly curated visuals on Instagram. That being said, the prevailing media narrative around Facebook has painted the company as callous and untrustworthy, which further erodes consumer trust and pushes people away from spending time on Facebook’s main site and app. Therein lies a bigger threat that Facebook’s deteriorating reputation and dwindling consumer trust poses to its future growth — it is prohibiting it from entering new markets and recapturing new sources of growth.
Most recently, Facebook’s plan of getting into the smart home market was stunted by its declining reputation, as evidenced by the overwhelmingly negative reactions to the launch of Facebook Portal. As we pointed out in our 2018 Outlook report, with more and more connected devices starting to infiltrate our homes, only the brands that consumers trust will be granted access into these intimate, personal spaces. Thus, Facebook’s bad reputation in regards to data privacy is a very real hurdle that the company will need to deal with in order to ensure its future growth and longevity as an attention aggregator.
Moreover, many have speculated Facebook’s sudden pivot towards private messaging may also be a preemptive reaction to the growing regulatory possibility of breaking up its various properties on antitrust grounds. Earlier this week, Senator Elizabeth Warren detailed her plan to break up big tech companies like Facebook, Google, and Amazon, as part of her bid for the upcoming presidential election. Facebook then temporarily removed her ads about breaking up big tech before quickly backtracking and blaming the incident on “outsourced content moderation.” Regardless of whether Senator Warren’s plan to break up the tech giants is the best solution to regulate the tech industry today — and there are strong arguments that it is not — the optics ended up looking terrible for Facebook. However, going by this newfound focus on private messaging, Facebook can easily justify its plan to merge the messaging services across Facebook Messenger, Instagram, and WhatsApp into one shared backend infrastructure, all in the name of better encryption and privacy protection, thus making it practically impossible to break apart.
Therefore, it would be wrong to assume this new mission statement from Zuckerberg is all just for show, for it is clear to anyone who has been paying attention that Facebook has multiple good reasons to rehabilitate its brand. And time is of the essence here. Advertisers are already starting to shift spending from Facebook proper to Instagram, and it would only be a matter of time before Facebook’s notoriety drags down Instagram and its other properties by association. In the short term, a complete pivot seems unlikely, given the massive size of its existing ad business and market inertia, but it is absolutely necessary for Facebook to get in front of a possible collapse and allocate more resources to building products that cater to people’s changing social media habits.
The WeChat Model
Now that Facebook is desperately in need of a makeover, it is interesting to see how Zuckerberg landed on private messaging as its new core service. Traditionally, we tend to separate messaging apps from social media, for they often serve different needs and operate in different modes of communication. One-to-one, or one-to-few, communication stands in stark contrast to the kind of one-to-many public posts that Facebook is known for. But more likely than not, social media usually do come with private messaging features, and Facebook already has a nice presence in the messaging space, given the global popularity of Messenger and WhatsApp, backed by the vast network effect that Facebook still owns in most global markets.
What is interesting to ponder then, is just how Facebook’s business model will evolve to keep up with its newfound focus on Facebook messaging. On one hand, the supposed pivot towards private messaging would likely mean a decline of attention on the News Feed, which will in turn harm it feed-based ad products. On the other hand, private messages are not exactly ad-friendly environments, as any misaligned brand message would be highly intrusive in the context of a private conversation.
Given these challenges, it is no wonder that many suggest that Facebook could probably learn a thing or two from Tencent’s WeChat, the dominant messaging app in China, and pivot its business model from an ad-based model to a commerce-driven one. Started as a simple app for sending private messages, WeChat’s gradual integration of mobile payments, offline utility functions, a social feed, web-based mini-apps, and in-app gaming over the years has turned it an inescapable “everything app” and a bona fide mobile OS that exists on top of iOS and Android for over 1 billion daily active users. Although it is unclear how much revenue WeChat actually generates for Tencent, its unique business model stands out among social platforms. instead of making money from in-feed ads and sponsored posts, WeChat makes a killing mainly by taking a cut through WeChat wallet and all of the transactions made through their system, as well as through the other value-added services, such as in-game purchases and stickers, available in the app.
Of course, WeChat achieved this level of ubiquity in China due to the unique market reality in China, which banned many global messaging and social apps from competing and also gave WeChat a perfect environment to promote WeChat Pay as Chinese consumers leapfrogged from cash to mobile payments. In addition, the mass adoption of mobile commerce, especially social commerce based on digital word of mouth from existing social network and influencers, as a main way of shopping among Chinese consumers further facilitated WeChat’s commerce-and-service-driven business model. Facebook’s deteriorating relationship with regulators and policy-makers also stands in stark contrast to WeChat’s amicable relationship with the Chinese government, which is instrumental in WeChat Pay being accepted as a payment method for civil services, public transportations, utility fees, and even traffic fines. All these conditions simply do not and likely will not exist for Facebook, which presents many tough challenges for Facebook to overcome should it want to adopt the same business model.
If Facebook wants to become more like WeChat, the first challenge it will have to overcome would be to integrate a payment solution across its properties and push for mass adoption. The integration of a native payment solution is key to the kind of micro-transactions that WeChat thrives on for its value-added services, and it also extends the reach of its payment solution into physical retail,making it useful tool for non-digital shoppers. In contrast, Facebook’s previous effort to launch its own payment solution failed to take off, and even though now you can choose to save your payment card info in your Facebook or Instagram profile, it is certainly not an integrated mobile payment solution that could be easily scaled and build up its own network effect. While Facebook reportedly has a team working on a blockchain-based payment product, it is unclear whether this would be the right payment solution to accelerate mobile payment adoption in developed markets, which remains around 20% of smartphone users in the U.S. with a sluggish growth rate, thanks to US shoppers being more acclimated to using credit and debit cards and retailers being slow to provide mobile payment options.
In addition, Facebook also has a lot more competitors in the social commerce space than WeChat ever encountered. A recent study from Cowen & Co. found that Pinterest is the leader among social media companies when it comes to U.S. product searches and shopping, far exceeding the likes of Facebook and Instagram. And with 55% of U.S. online shoppers starting their product searches on Amazon.com, Facebook has a long way to go to be considered as a legitimate destination for online shopping and product discovery. That being said, Instagram does hold great potential for mobile commerce, and Facebook is reportedly building a spin-off shopping app that integrates discovery at point of purchase. Only time will tell if that would become a viable platform for Facebook to incorporate more messaging features to build off a network effect, as WeChat has managed to pull off.
The Future of Social
Going through the list of new principles Zuckerberg outlined in his post, the first three — private interactions, encryption, and reducing permanence — all point to the kind of selective, ephemeral sharing that seems more native to rival Snapchat than Facebook proper. However, it is also important to remember that when Facebook successfully copied Snapchat’s main format Stories on Instagram and effectively stunted Snapchat’s growth, it was already acting in response to a clear shift in the change of preferred method of social sharing. The later addition of the Close Friends list further limited the exposure of user’s Stories and made social sharing a more intimate experience on Instagram.
In most developed markets, Facebook is a maturing platform, which means it has acquired most users in the market and has to keep coming up with new distractions to retain user attention, be it original video content or mobile games. Private messaging, in contrast, is an inherently sticky product that people will use regularly once a habit is formed. Therefore, there is also a real imperative for Facebook to ensure that users stay on its messaging platforms even if they start to lose interest in their News Feed content.
The future of social media is shaping up to be fundamentally different from the kind of global public square that most social platforms are today. One of the major media trends we highlighted in our new Outlook report suggests that, after a decade of steady growth, social media is about to enter a tumultuous phrase of unbundling. As the biggest social networks now start to fully reflect the reality of humanity, with both its upsides and its downsides magnified by the internet, consumers might look to other, calmer platforms to fulfill their needs that are being served by Facebook today. The result may be a highly fractured landscape, with the world chatting away in countless separate channels and spending their time and money on smaller platforms.
Somewhat ironically, none of this new vision for social will actually help curb the spread of misinformation, as evidenced by the way WhatsApp has been used in India to spread rumors and incite violence. But it would make Facebook seem less culpable — after all, it is hard to regulate what people share in end-to-end encrypted messages. Some might see Facebook’s pivot to private messaging as a massive cop-out to its responsibilities as a de facto media platform, while others may say the situation has become beyond salvageable anyway. Perhaps a better way to combat misinformation and fake news is to teach everyone media literacy, but that is certainly a huge undertaking that no social media company would voluntarily take on.
Looking beyond the current mobile era, the next computing paradigm shift, most likely powered by a mixture of augmented reality and wearables, may further dissolve social media from a feed-based structure into a context-based one. AR would generate customizable digital avatars for offline and online encounters, but it would also tie our social profiles back to our physical bodies and ground our connections in a physical context. Mirroring the shift from one-to-many sharing to one-to-few, the future of social will continue to unbundle the various functions served by today’s social media — whether it’s for a curated feed of entertainment and news, a platform for interpersonal communication, or as a tool for accumulating social capital (an often underlooked utility of social media) — and distribute them into various apps and platforms for better alignment of use cases.
While Zuckerberg seems to want to only focus on facilitating interpersonal communication for now, Facebook’s business model will have to evolve with its services in order for Facebook to survive in the long run. In order to do that, Facebook will also have to configure brand-customer interactions into the mix and allow users to chat with businesses just as easily as they could with their family and friends, but with guardrails to ensure that brands don’t overstep the boundary of brand communications. For brands, this would mean a significant shift in social strategy. To prepare for a future where brands will have to reach out to consumers in the intimate context of private chats, brands will need to rethink how they reach out to customers and the value they can bring to the conversations. In short, brands need to justify their place in consumer’s messaging app, through either personalized content or excellent services, so that they can quickly and smoothly adapt to the changing landscape of social media.