Facebook and Google are the second and twelfth most valuable companies in the US (accurate at 22/6/15 see here), they both rose to prominence extremely quickly setting records for rapid valuation growth on the way, and as a result they are both very aware that their shelf life could be limited. They’ve seen great companies like Yahoo and Microsoft lose relevance and they don’t want it to happen to them.
The lesson from those businesses is that developments in technology can quickly undermine a company’s core strength. The internet and mobile marginalised Microsoft’s dominance of the desktop and improvements in search took away the need for Yahoo’s portal of curated links.
As a result Page and Zuckerberg have both made bold moves to future proof their businesses.
Google has launched a range of bold and innovative projects including Android, self driving cars, a project to deliver internet connectivity to the developing world via orbiting balloons, and Google Glass. They even went as far as changing the name of the company to Alphabet, emphasising the point that the Google search business is just one part of what they do.
Facebook has mostly moved via bold acquisitions, starting with $1bn for Instagram six weeks before their IPO, moving the through $24bn for WhatsApp, before paying $2bn for Oculus. That said, they also have a track record of making radical changes to their product, often in the face of user protest. Introducing the Newsfeed and splitting Messenger out from the main Facebook platform are stand out as the two best examples where they did that successfully.
The obvious difference between Google’s bold moves and Facebook’s bold moves is that Google is venturing much further from its core business. At first look Facebook’s acquisition of Oculus might look like it’s a big step away from social media, but if you think of their business as mediating social interaction then it doesn’t seem that way.
I suspect Google is innovating further from its core because it’s a more mature business than Facebook. Android was one of Google’s early bold moves, and it’s easy to see how that was closer to the core because it helps maintain their strength in search. It was only as their search business began to face existential risks that they started making moves designed to open up whole new areas. It’s impressive is that they have started making these moves so early.
Facebook’s acquisitions of Instagram and Whatsapp and the separation of Messenger from the main Facebook app are clear moves to protect and extend their core social media business. These strategies have helped them continue to grow their audience and advertising revenues and whilst individual properties might whither, potentially including Facebook, there’s still no sign of an existential threat to social networking as a category. To put numbers on it, back in March they had 1.4bn MAUs on Facebook, 700m on Whatsapp, 600m on Messenger and 300m in Instagram. That’s four of the six largest social media properties on the planet, and they’re all still growing.
All of which has me thinking that Facebook might become more radical as its business matures.