Mark Zuckerberg is trying to destroy Facebook, well sort of. He isn’t trying to kill the $150 billion company he built, but he is aiming to dismantle Facebook as the walled in garden where all social interactions on the internet occur. In his latest interview with the New York Times he makes it very clear that he understands that he can not trap all of the social activity on the web on a single platform which he calls the “one big blue app”. Throughout the interview Zuckerberg demonstrates his knowledge of the law of unbundling and his strategy for survival. In the era of the internet 2.0 becoming a jack of all trades on the web is not a viable business strategy.
As a result of the smartphone and tablet boom of the past 5 years it seems that almost every internet software and service company is screaming the words “mobile engagement”. The interview titled, “Can Facebook Innovate?” focuses on Creative Labs, the app development wing of Facebook and how Zuckerberg envisions the future experience of FB on mobile. Right out of the gate the Facebook CEO admits that the initial plan was to launch a mobile app that captured as much of the desktop experience of Facebook as possible, but that can’t be a long term answer. He goes on to say,
“But 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. In mobile there’s a big premium on creating single-purpose first-class experiences.
So what we’re doing with Creative Labs is basically unbundling the big blue app.”
In this initial question where he asked to describe Creative Labs Zuckerberg reveals a great deal about the direction he sees the company going. Zuckerberg grew up watching the first iteration of the internet. The man may only be 29 years young and still rocking hoodies but he has seen internet empires rise and fall. The ruins of Yahoo and AOL serve as stark reminder that becoming a jack of all trades and a master of none means that others will come along and eat your lunch. When competitors see opportunity and specialize, attacking individual verticals within your business, chances are each small competitor will offer a better experience and soon you will be left with nothing wondering what the hell just happened.
The best part of the NY Times interview was that the Facebook boss embraced unbundling and has come up with a plan to combat it. Zuckerberg is not going to let little piranhas come along and nibble away at Facebook, he is going to dismantle the big blue app himself. When the picture sharing experience on Facebook mobile was clunky, Zuckerberg went out and spent $1 billion on Instagram. Instagram is a perfect example of his plan to unbundle Facebook into single purpose first class experiences on mobile. When asked about Instagram and WhatsApp which are not going to be branded as Facebook apps, Mark Zuckerberg says that we can expect to see more apps independent of the Facebook identity that can each be tied to different audiences we share with.
While Zuckerberg is being proactive and getting ahead of the curve, many companies in other sectors are dropping the ball on unbundling. One example is Angie’s List, a company that has been growing rapidly but is just beginning get torn apart by smaller apps that attack individual verticals within Angie’s List’s core business. Angie’s List charges a nominal membership fee to give customers access to crowdsourced reviews of local businesses. Angie’s List’s profit and revenue charts both look good, but there are 2 big problems lurking here. The first is the problem of unbundling. Angie’s List is trying to be a jack of all trades in business reviews when smaller apps that focus on individual verticals are easier to use on mobile and offer better user experiences. The second problem is that they are charging a membership fee for what many other companies give away for free. Yelp.com is the best example here. Yelp has done a great job entrenching itself as a restaurant and bars review site which gives everything away for free on the front end and offers a best in class mobile experience.
Angie’s List is set to report earnings next Wednesday April 23. The company’s EPS and revenue may be increasing but the Estimize community is expecting year over year revenue growth to slow to 19.4% compared to a minimum yoy sales growth of 49% over the previous 4 quarters.
Facebook also reports on the 23rd. So far the 77 contributing analysts who have submitted estimates for Facebook have a much more optimistic outlook. So how do you think unbundling will affect Facebook and Angie’s List this quarter? Head over to the Estimize.com platform and have your say. Remember to follow our calendar to keep up to date with the latest market moving news in earnings.