Why Facebook's Unbundling Strategy May Be Good for Its Future
For quite some time, it appeared that Facebook was facing the risk of gradually getting cannibalized by new entrants in the mobile platform space. In a recent interview, Mark Zuckerberg mentioned the need to create single-purpose, first-class experiences to capture the attention of mobile users. One of the approaches Facebook is considering is unbundling the features offered for its mobile app.
Facebook can easily retain its desktop user base because they use the site for social networking basics—sharing updates, posting pictures and videos, chatting, etc. As Zuckerberg explained, mobile users pose a different challenge. "I think on mobile, people want different things. Ease of access is so important. So is having the ability to control which things you get notifications for. And the real estate is so small."
The commonality between Facebook’s recent high-profile acquisitions (WhatsApp and Instagram) and the popularity of other apps—such as Snapchat—suggests that these are light apps focusing on just one or two aspects of social networking. It is evident that the monolithic nature of Facebook's mobile app may not get the same level of users engaged as its desktop version. Unbundling the complexity seems like a logical step forward for Facebook.
A Harvard Business Review article stated that "Facebook enjoys three advantages over rivals: technological capabilities, economies of scale in its infrastructure, and most importantly, network effects." When network effect is present, the value of a product or service is dependent on the number of others using it. For example, the more people who own telephones, the more valuable the telephone is to each owner. Facebook, with almost one billion plus users and a single stop website for social networking needs, has been able to create unprecedented network effects.
Will Facebook be able to retain the network effects post unbundling? The article suggests that although Facebook may let go of some of the network effects, it's in their favor is that most of the unbundled apps—such as WhatsApp and Instagram—have millions of their own users causing network effect on their own. Recognizing the user segment needs, Facebook has let these apps retain their own brands without imposing its own brand identity on them.
Initiatives such as Facebook Paper are in experimental mode, and as Zuckerberg suggests in his interview, most of these unbundled apps may take years before they significantly contribute to revenue. Since pay off may take a long time, unbundling may be less attractive for established players.
Facebook isn’t alone in its foray into unbundling. Foursquare recently announced its decision to split its mobile app into two for simplification's sake. Dropbox announced Carousel, an image-focused application separate from its main app.
Facebook seems to realize that to be relevant in today's business, they need to re-adjust their business before their competitors take charge. An unbundling strategy reflects this thinking.
Do you agree?
