Click here to close now.

Welcome!

MICROSERVICES Authors: John Wetherill, Elizabeth White, Liz McMillan, Brian Vandegrift, XebiaLabs Blog

Related Topics: Web 2.0, Java, Wireless, MICROSERVICES, Linux, Big Data Journal

Web 2.0: Article

Facebook Plays Short and Long Game with WhatsApp and Oculus Rift | Part 1

Takes on Google and Mobile

When Facebook decided to invest a cool $19 billion ($16 billion upfront) for messaging app WhatsApp the entire world was bound to take notice. Telecommunications types, in particular, were keen to understand how this latest move would impact them as mobile operators have been feeling the heat from over the top (OTT) players like Google and Facebook for years. (To put this $19 billion in perspective, AT&T, one of the world's largest telecom carriers, invests about $20 billion in networks and spectrum in an entire year.) Shortly thereafter, in another surprise move and with the dust not quite settled on WhatsApp, Facebook picked up virtual reality startup Oculus Rift for $2 billion. This left many in the industry wondering what exactly was going on. While WhatsApp and Facebook's previous acquisition of Instagram for $1 billion were in keeping with its social network roots, Oculus Rift was in the video game industry and had yet to release a product. This led many to ask: What was Zuckerberg thinking? But if you dig deeper, these acquisitions are intertwined and central to Facebook's short and long term play to develop the next-generation communications platform. With WhatsApp and Oculus Rift, Facebook takes on Google and mobile providers in the race to do just that.

Let's start with WhatsApp. Messaging is one of the top activities on smartphones and these apps are increasingly viewed as social networks. WhatsApp is already an international phenomenon, even if it has not made as much of a statement in the U.S. just yet. In some markets, WhatsApp generates almost as much messaging traffic as all traditional carriers combined. Instead of people using carrier text and voice messaging at cents per message, WhatsApp users consume a few bytes of their data plan for close to zero, and send WhatsApp $1 a year. That's correct: WhatsApp charges nothing for the first year of service and then a mere $1 per user per year. That's not much to a phone company, but nice work for an app company getting close to half a billion users. This leads phone companies to pine after all that revenue they're losing. As if that's not enough, WhatsApp will add a voice calling service to its offering. With this capability, WhatsApp Facebook challenges telcos not only on mobile messaging but also for their bread and butter business: phone calls.

Facebook's entire history is all about getting more and more people to sign up and WhatsApp currently boasts more than 450 million active monthly users. The rapid rise of WhatsApp's user-base was largely due to the low cost and its commitment to not collect user data for advertising revenue, despite users providing detailed personal information to the company, including private texts to friends. If these qualities remain intact, the combined user base of both networks will be truly massive.

Zuckerberg assured the world that acquiring WhatsApp was not simply about money, but rather that it was in tune with his vision that everyone in the world should be connected. He has also stated that mobile operators should give away Internet access in developing nations. Who is going to argue against the idea that communications (in the broadest sense) has delivered social and economic benefits to people in affluent countries? If we expand opportunities to communicate by providing cheap and effective tools, then people and economies benefit, and that's a good thing. However, with free Internet access and almost free WhatsApp voice calling, Facebook can offer nearly what carriers can offer and all those customers will in reality have more disposable income to pay bigger subscriptions and respond to ads. This will mean Facebook gets richer, even as Zuckerberg implied that this would be a happy coincidence, and not the fundamental reason for the acquisition. But it's important to remember that mobile operators stand between Facebook and its customers and rallying public opinion behind a noble cause is good for Facebook and makes the carriers look greedy for not supporting the cause.

WhatsApp is obviously an important element of Facebook's strategy and the company is committed to honoring the app's principles: cheap, reliable, easy to use, no ads and preserves privacy. Just like Google, Facebook is increasingly faced with the harsh reality that many people simply don't like or trust its platform. Buying companies like WhatsApp and Oculus Rift and giving them the freedom to stick to their core roots is an important component to growing the all-important subscriber base and restoring the value and "cool" factor of Facebook long term. Rather than trying to integrate acquisitions into the mother ship, Facebook and Google (e.g., Nest acquisition) are taking a similar approach by putting their significant marketing and development resources behind the acquired companies while letting them continue to innovate autonomously.

The autonomous component is a key strategy. Facebook's internal innovations within its original social networking platform (Facebook Platform and Facebook Messenger for PCs) have not been successful. So, just like corporate giants in other industries, Facebook needed fresh infusion from the outside. For example, while Snapchat and Pinterest have been innovating in social media, Facebook bought its way in with the Instagram purchase in 2012. Facebook's "me too," Snapchat look alike app called Poke - an internal endeavor - again didn't make it off the ground. And it's not just Facebook. Google's list of abandoned projects has its own Wikipedia page that is worth a read. However, when you compare these two companies' success rates in innovation to other big companies (e.g. AT&T, GE, Ford, Nokia) they all have lists of failures alongside their successes that keep them in business. We expect Google and Facebook to be different because they are still relatively new, but now they are big and like any large corporation are just as prone to messing up big projects. Following in the path of corporate giants that came before them, buying innovative small companies is critical to their long-term strategy and relevance.

When it comes to these companies' actual wins, some might argue, for example that the Android OS and Google Web Services are only successful because they have been given way to boost Google's real business - Google search and Web ads - which are still responsible for the bulk of Google's revenue. This is a similar theme for Facebook. Both companies are riding the Web advertising wave, but now to stay on top in that field they need to remain the go-to players for the next-generation communications/advertising platform: augmented reality provided by Google Glass and Virtual Reality provided by Oculus Rift (Facebook). However it is important to note that advertising revenue has become, for these companies, not the primary goal, but rather a means to an end. Google's actions suggest that the company has a bigger picture in mind, and Zuckerberg wants to build a lasting place in history for himself and Facebook. Both companies are entering these new modified-reality markets to ensure they have a growing subscriber base and their advertising revenue is protected well into the future to give them the funds they need to do what they want in their endeavors. But that's where the similarities come to a grinding halt.

I'll get into the differences in my next blog. Follow us on Twitter to make sure you don't miss it.

More Stories By Esmeralda Swartz

Esmeralda Swartz is CMO of MetraTech, now part of Ericsson. She has spent 15 years as a marketing, product management, and business development technology executive bringing disruptive technologies and companies to market. Esmeralda is responsible for go-to-market strategy and execution, product marketing, product management, business development and partner programs. Prior to MetraTech, Esmeralda was co-founder, Vice President of Marketing and Business Development at Lightwolf Technologies, a big data management startup. She was previously co-founder and Senior Vice President of Marketing and Business Development of Soapstone Networks, a developer of OSS software, now part of Extreme Networks (Nasdaq:EXTR). At Avici Systems (Nasdaq:AVCI), Esmeralda was Vice President of Marketing for the networking pioneer from startup through its successful IPO. Early in her career, she was a Director at IDC, where she led the network consulting practice and worked with startup and leading software and hardware companies, and Wall Street clients on product and market strategies. Esmeralda holds a Bachelor of Science with a concentration in Marketing and International Business from Northeastern University.

You can view her other blogs at www.metratech.com/blog.

Comments (0)

Share your thoughts on this story.

Add your comment
You must be signed in to add a comment. Sign-in | Register

In accordance with our Comment Policy, we encourage comments that are on topic, relevant and to-the-point. We will remove comments that include profanity, personal attacks, racial slurs, threats of violence, or other inappropriate material that violates our Terms and Conditions, and will block users who make repeated violations. We ask all readers to expect diversity of opinion and to treat one another with dignity and respect.


@MicroservicesExpo Stories
It's 2:15pm on a Friday, and I'm sitting in the keynote hall at PyCon 2013 fidgeting through a succession of lightning talks that have very little relevance to my life. Topics like "Python code coverage techniques" (ho-hum) and "Controlling Christmas lights with Python” (yawn - I wonder if there's anything new on Hacker News)...when Solomon Hykes takes the stage, unveils Docker, and the world shifts. If you haven't seen it yet, you should watch the video of Solomon's Pycon The Future of Linux C...
OmniTI has expanded its services to help customers automate their processes to deliver high quality applications to market faster. Consistent with its focus on IT agility and quality, OmniTI operates under DevOps principles, exploring the flow of value through the IT delivery process, identifying opportunities to eliminate waste, realign misaligned incentives, and open bottlenecks. OmniTI takes a unique, value-centric approach by plotting each opportunity in an effort-payoff quadrant, then work...
SYS-CON Events announced today that MangoApps will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY., and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. MangoApps provides private all-in-one social intranets allowing workers to securely collaborate from anywhere in the world and from any device. Social, mobile, and eas...
SYS-CON Events announced today that Solgenia will exhibit at SYS-CON's 16th International Cloud Expo®, which will take place on June 9-11, 2015, at the Javits Center in New York City, NY, and the 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. Solgenia is the global market leader in Cloud Collaboration and Cloud Infrastructure software solutions. Designed to “Bridge the Gap” between Personal and Professional S...
When it comes to microservices there are myths and uncertainty about the journey ahead. Deploying a “Hello World” app on Docker is a long way from making microservices work in real enterprises with large applications, complex environments and existing organizational structures. February 19, 2015 10:00am PT / 1:00pm ET → 45 Minutes Join our four experts: Special host Gene Kim, Gary Gruver, Randy Shoup and XebiaLabs’ Andrew Phillips as they explore the realities of microservices in today’s IT worl...
This month I want to revisit supporting infrastructure and datacenter environments. I have touched (some would say rant) upon this topic since my post in April 2014 called "Take a Holistic View of Support". My thoughts and views on this topic have not changed at all: it's critical for any organization to have a holistic, comprehensive strategy and view of how they support their IT infrastructure and datacenter environments. In fact, I believe it's even more critical today then it was a year ago ...
The world's leading Cloud event, Cloud Expo has launched Microservices Journal on the SYS-CON.com portal, featuring over 19,000 original articles, news stories, features, and blog entries. DevOps Journal is focused on this critical enterprise IT topic in the world of cloud computing. Microservices Journal offers top articles, news stories, and blog posts from the world's well-known experts and guarantees better exposure for its authors than any other publication. Follow new article posts on T...
Hosted PaaS providers have given independent developers and startups huge advantages in efficiency and reduced time-to-market over their more process-bound counterparts in enterprises. Software frameworks are now available that allow enterprise IT departments to provide these same advantages for developers in their own organization. In his workshop session at DevOps Summit, Troy Topnik, ActiveState’s Technical Product Manager, will show how on-prem or cloud-hosted Private PaaS can enable organ...
Cloud computing is changing the way we look at IT costs, according to industry experts on a recent Cloud Luminary Fireside Chat panel discussion. Enterprise IT, traditionally viewed as a cost center, now plays a central role in the delivery of software-driven goods and services. Therefore, companies need to understand their cloud utilization and resulting costs in order to ensure profitability on their business offerings. Led by Bernard Golden, this fireside chat offers valuable insights on ho...
Microservice architectures are the new hotness, even though they aren't really all that different (in principle) from the paradigm described by SOA (which is dead, or not dead, depending on whom you ask). One of the things this decompositional approach to application architecture does is encourage developers and operations (some might even say DevOps) to re-evaluate scaling strategies. In particular, the notion is forwarded that an application should be built to scale and then infrastructure sho...
SYS-CON Events announced today the IoT Bootcamp – Jumpstart Your IoT Strategy, being held June 9–10, 2015, in conjunction with 16th Cloud Expo and Internet of @ThingsExpo at the Javits Center in New York City. This is your chance to jumpstart your IoT strategy. Combined with real-world scenarios and use cases, the IoT Bootcamp is not just based on presentations but includes hands-on demos and walkthroughs. We will introduce you to a variety of Do-It-Yourself IoT platforms including Arduino, Ras...
Even though it’s now Microservices Journal, long-time fans of SOA World Magazine can take comfort in the fact that the URL – soa.sys-con.com – remains unchanged. And that’s no mistake, as microservices are really nothing more than a new and improved take on the Service-Oriented Architecture (SOA) best practices we struggled to hammer out over the last decade. Skeptics, however, might say that this change is nothing more than an exercise in buzzword-hopping. SOA is passé, and now that people are ...
Microservices are the result of decomposing applications. That may sound a lot like SOA, but SOA was based on an object-oriented (noun) premise; that is, services were built around an object - like a customer - with all the necessary operations (functions) that go along with it. SOA was also founded on a variety of standards (most of them coming out of OASIS) like SOAP, WSDL, XML and UDDI. Microservices have no standards (at least none deriving from a standards body or organization) and can be b...
Right off the bat, Newman advises that we should "think of microservices as a specific approach for SOA in the same way that XP or Scrum are specific approaches for Agile Software development". These analogies are very interesting because my expectation was that microservices is a pattern. So I might infer that microservices is a set of process techniques as opposed to an architectural approach. Yet in the book, Newman clearly includes some elements of concept model and architecture as well as p...
You hear the terms “subscription economy” and “subscription commerce” all the time. And with good reason. Subscription-based monetization is transforming business as we know it. But what about usage? Where’s the “consumption economy”? Turns out, it’s all around us. When most people think of usage-based billing, the example that probably comes to mind first is metered public utilities — water, gas and electric. Phone services, especially mobile, might come next. Then maybe taxis. And that’s ab...
SYS-CON Events announced today the DevOps Foundation Certification Course, being held June ?, 2015, in conjunction with DevOps Summit and 16th Cloud Expo at the Javits Center in New York City, NY. This sixteen (16) hour course provides an introduction to DevOps – the cultural and professional movement that stresses communication, collaboration, integration and automation in order to improve the flow of work between software developers and IT operations professionals. Improved workflows will res...
As a group of concepts, DevOps has converged on several prominent themes including continuous software delivery, automation, and configuration management (CM). These integral pieces often form the pillars of an organization’s DevOps efforts, even as other bigger pieces like overarching best practices and guidelines are still being tried and tested. Being that DevOps is a relatively new paradigm - movement - methodology - [insert your own label here], standards around it have yet to be codified a...
Microservices, for the uninitiated, are essentially the decomposition of applications into multiple services. This decomposition is often based on functional lines, with related functions being grouped together into a service. While this may sound a like SOA, it really isn't, especially given that SOA was an object-centered methodology that focused on creating services around "nouns" like customer and product. Microservices, while certainly capable of being noun-based, are just as likely to be v...
Containers and microservices have become topics of intense interest throughout the cloud developer and enterprise IT communities. Accordingly, attendees at the upcoming 16th Cloud Expo at the Javits Center in New York June 9-11 will find fresh new content in a new track called PaaS | Containers & Microservices Containers are not being considered for the first time by the cloud community, but a current era of re-consideration has pushed them to the top of the cloud agenda. With the launch ...
An explosive combination of technology trends will be where ‘microservices’ and the IoT Internet of Things intersect, a concept we can describe by comparing it with a previous theme, the ‘X Internet.' The idea of using small self-contained application components has been popular since XML Web services began and a distributed computing future of smart fridges and kettles was imagined long back in the early Internet years.