How Facebook will become the Internet
Patrick van Hoof
Creating new products & ventures in EU/US. Investing in, advising on & speaking about exponential tech (AI, Robotics, Quantum, 4D)
FB has the long-term goal to "be the Internet." Their thesis is that we are slowly but surely moving from a browsing-based Internet to an integrated-platforms-based Internet. Everything a user wants to do, find or buy should be achievable within one or several ecosystems. FB is trying to get to that place, as are other tech giants such as Amazon and Google.
Secondly, FB is fully committed to virtual reality (VR) and considers it the computer of the future. While it will take years for the mass market to adopt the technology, I firmly believe in this premise. However, I see more long-term value in a combination/blend of virtual reality and augmented reality modes. We experiment with these technologies in our lab environment at Huge, to see how the living, working and transportation environment will change, as well as individual sectors.
Mark’s long-term "roadmap" is heavily geared towards video. Last week the live-streaming product "Facebook Live" was rolled out to all users, instead of only media and celebrities. While “ on-demand” has been popular for a while (judging by the astounding growth of companies like Netflix and Spotify), it is now becoming a more social event. One that is ephemeral in nature, to some extent. This is a popular theme that apps like Snapchat have been focused on.
The third play is geographical expansion. The "social network" should include the world’s entire population. This is the ultimate outcome of the network-effect. In an effort to service South-East Asia and Africa,Facebook is focusing on basic services and internet connections (e.g. Wi-Fi via unmanned aerial vehicles / drones, etc). Google and Amazon are as well.
What are the major changes that will happen in the short term?
Facebook - like all other Internet companies – wants to have as many users as possible spending evermore time with its products / services. That is key, because it has a major (positive) impact on the users’ emotional connection, the network effect, ads, etc. With this in mind, FB evolved from a desktop website to a mobile website, then to an app with many integrated features, and most recently to two separate apps (FB and Messenger). Mark's big plan is to make Messenger the new platform (instead of mobile operating systems, running apps). New chatbot technology enables users to make payments, not only peer-to-peer but also to companies that they "speak to". This creates the opportunity for e-commerce. Companies, developers and partners can now develop applications for the Messenger platform - and soon also for WhatsApp and Instagram, which are both owned by FB and have hundreds of millions of users!
Are investors’ expectations too high or not?
The aforementioned strategy, products and enhancements can scale massively (the holy grail in Silicon Valley), which is therefore very interesting from an investor perspective. Although the current price-earnings ratio seems incredibly high at 84, there are many opportunities for exponential growth. It is also a value that is hard to benchmark, partly because FB will no longer be in just the "tech" or "Internet" sectors (that have average price-earnings ratios of 20-30) now that they are disrupting other industries (banking, retail, telecommunications, etc!). Facebook could be an interesting long-term investment, even at current multiple levels.
FB’s actual usage supports the high expectations: it is by far the most widely-used (adoption rate of 97% among Millennials example) and longest-used (almost 30 hours per month among Millennials) social platform in the world. Instagram follows with a 65% adoption rate, and 7 hours of use per month. And remember, even Instagram is Facebook.
Cover image credit: https://genfringe.com/2013/01/world-domination-and-facebook/
If you are interested in the idea of long-term roadmapping and cross-industry developments in technology, here is my LinkedIn article on the subject: