There is no company that I have changed my mind about more often than Facebook.
One of the first articles I wrote for Stratechery – almost exactly a year ago – explained why LINE and other messaging apps were superior to Facebook on mobile. I predicted that Facebook Home would be a failure because Mark Zuckerberg and company didn’t understand how people used mobile phones, and reveled when my prediction came true.
Facebook’s incredible transition to a mobile advertising powerhouse, though, changed my mind; in Mobile Makes Facebook Just an App; That’s Great News I argued that the constraints of mobile solved a lot of problems for Facebook, and I’ve been largely bullish ever since (although I was critical of their attempt to buy Snapchat). I also approved of Facebook’s acquisition of WhatsApp, and wrote how Facebook was becoming the Social Conglomerate.
This week’s acquisition of Oculus, though, has changed my mind once again. I’m back to being a Facebook bear.
There is certain logic to any Facebook acquisition given the current stock price. The current market valuation of $156 billion implies significant revenue growth on an annual basis far greater than simply converting desktop revenue streams to mobile ones; if you assume the stock price will decrease in the future, then making largely stock-based purchases makes a ton of sense. Moreover, Zuckerberg is highly incentivized to spend Facebook’s money; he only owns 28% of that money, but has 100% control of Facebook – and of whatever is purchased.
So why not buy an option on what could be the next platform? That is Fred Wilson’s argument:
But the roadmap has been clear for the past seven years (maybe longer). The next thing was mobile. Mobile is now the last thing. And all of these big tech companies are looking for the next thing to make sure they don’t miss it.. And they will pay real money (to you and me) for a call option on the next thing.
Zuckerberg said much the same thing:
Our mission is to make the world more open and connected. For the past few years, this has mostly meant building mobile apps that help you share with the people you care about. We have a lot more to do on mobile, but at this point we feel we’re in a position where we can start focusing on what platforms will come next to enable even more useful, entertaining and personal experiences.
I have two very significant problems with this:
- Buying WhatsApp was the first step in making Facebook competitive in the messaging space, but the job is not even close to being done. When I wrote Messaging: Mobile’s Killer App I barely mentioned WhatsApp simply because it is barely competitive with the platform that LINE and WeChat are building; for most users, it’s simply free SMS, and if Zuckerberg thinks Facebook is home safe in mobile, particularly in Asia, he is sorely mistaken.
- More significantly, while Oculus’ technology is by all accounts incredible, I, quite strongly, don’t believe it is what is next for general purpose computing.1
In this regard, perhaps the most pertinent article I’ve written wasn’t about Facebook at all; it was about Apple, and their new digital hub. I argued that Apple is positioning the iPhone as the center of your digital existence, with a potential iWatch as an extension of that, and, perhaps over time, the future hub.
Setting aside implementation details for a moment, it’s difficult to think of a bigger contrast than a watch (or ring) and an Occulus headset that you, in the words of Zuckerberg, “put on in your home.” What makes mobile such a big deal relative to the PC is the fact it is with you everywhere. A virtual reality headset is actually a regression in which your computing experience is neatly segregated into something you do deliberately.
The power of computing, at least in my world view, was best articulated by – who else – Steve Jobs years ago:
What is so powerful about this analogy – that the computer is a bicycle for the mind – is that it elevates the humanity of a desired action, in this case transportation, and inserts the computer as an aid. This is exactly what the iPhone and the smartphones that followed have done for people: instead of a computer being a destination, it’s something that is always with us, ready to call up a map, or a restaurant recommendation, or simply fill time with a flapping bird. To put it another way, mobile is a big deal not because we use computers more, but because a computer is with us in more places.
Envisioning a future in which Oculus’ technology is the dominant platform is diametrically opposed: it’s a reality where humans retreat from day-to-day activities in favor of computers. This idea – a life lived in computers – is something that appeals to the technically predisposed; who among us spends all day in front a glowing screen, and then goes home to do the exact same? I’m sure Zuckerberg is in that boat. But it’s a much smaller boat than many technologists realize.
For most people, computers are a means, not an end. Computers help them create music, or write novels, communicate, wayfind, or hookup. To use Jobs’ analogy, it’s not that people want to ride a bicycle for a bicycle’s sake, but because they want to go from Point A to Point B; offering such a person a full-featured massage chair simply misses the point.
Zuckerberg’s biggest strength is his willingness to adjust and adapt, as seen by Facebook’s mobile pivot. This acquisition, though, suggests that pivot was rooted more in a response to the facts on the ground than it was in a fundamental appreciation of why smartphones are the best bicycle yet, and that makes me pessimistic.
- Killer game platform though ↩