Facebook's convergence conundrum
Merging Facebook Messenger, WhatsApp and Instagram is a risky gamble and there isn't a good enough reason to do so.
Facebook's announcement that it plans to merge Facebook Messenger, WhatsApp and Instagram has caused an expected stir.
It also puts to rest speculation over why WhatsApp's founders left the company last year, even forsaking massive stock options in the process.
A lot of the furore around this move is focusing on user data issues: the spectre of Facebook being able to mine more data. Another concern is how Facebook plans to enable multiple messenger services to talk to each other and maintain WhatsApp's much-loved encryption while bringing Instagram and Facebook Messenger into encrypted space.
This is apparently no small technical feat and could possibly even harm Facebook's ability to mine data; that's assuming encryption becomes a permanent feature on all three services.
One other gamble is that the three businesses identify people in different ways: on Facebook, you need a real name, WhatsApp wants a phone number and on Instagram, you can be anything that isn't explicit or taken. Facebook has landed in trouble before for collating data between the three companies and this convergence of data isn't going to lessen scrutiny from regulators.
Why the gamble?
So why make this massive change if it's so risky? The popular theory is that Facebook wants to better mine the data and shore up its ad revenue business. If this is true, it's a reason for concern... if you own Facebook stock.
If Facebook's growth strategy going forward still relies mainly on data mining, it's a one-trick pony. But this might be due to pressure to monetise WhatsApp, which has staunchly been ad-free. Still, it's not exactly diversification.
The real risk here is that Facebook ends up disturbing two heavily embedded cultures that are supported by massive user bases.
Another is to improve security. Centralised data could help Facebook better manage and protect the data it stores. This is a noble idea and might be an attempt to regain the trust of its users.
No doubt the Cambridge Analytica scandal would have inspired this logic. But therein lies the flaw: Cambridge Analytica's data abuse resulted from Facebook's governance failures. It should have kept a closer eye on what its partners were doing. To put WhatsApp and Instagram data under Facebook's oversight seems like two steps back.
Then there is the suggestion that by merging the three companies it will be a lot harder to ever split them apart again, so maybe Facebook is worried about looming anti-trust action. Yet some experts say this might actually raise the hackles of regulators who granted its acquisitions because Facebook said it wouldn't merge data between them.
One reason I can think of is efficiency: running three businesses with three different ways of doing things is messy. This makes a lot more sense, but it's, in my opinion, a bad, bad idea.
Risking its golden geese
Facebook has two billion active users; WhatsApp has 1.3 billion and Instagram over a billion. There are obviously considerable overlaps, but each business commands customer bases that are unrivalled unless you consider Chinese services. Sometimes you should count your blessings, not wonder how to make them better.
The real risk here is that Facebook ends up disturbing two heavily embedded cultures that are supported by massive user bases. WhatsApp has a universal simplicity and no-fuss approach that has made it popular across the world.
Instagram, meanwhile, doesn't fall over backwards to please its users but instead deploys some rather stoic ideas that actually enrich the content produced by them. Facebook has little restraint in comparison and appears to struggle controlling its own kingdom more than its vassal states are.
Mark Zuckerberg owns three massive businesses and now he wants to start creating one entity out of them. No matter how I look at it, there isn't a good enough reason to do so, not ones that don't come with considerable risks, such as user alienation or regulatory scrutiny. Apparently, it's also causing unhappiness inside the company. It would make more sense to keep them as partners, which is working well between Facebook and Instagram.
Facebook should be mindful of one thing: it needs other ways to make money. At the moment, its dominance is directly proportional to the vast audiences it attracts. That won't last forever and putting them all in the same basket isn't going to make it more attractive. All that is perhaps holding back mass user defection is the lack of viable large-scale alternatives. If lack of competition is the only reason why people stay with you, then maybe upsetting them is not the smartest move.